Implementation of International Financial Reporting Standards and the Quality of Financial Statement Information; An Investigation of Earnings Management and Value Relevance

This study investigates the impact of the implementation of the International Financial Reporting Standards (IFRSs) on key financial measures of UK firms and explores their incentives to provide voluntary disclosures before the official IFRS adoption. The study also examines the volatility effects of IFRS implementation, the earnings management potential under IFRSs and the value relevance of IFRS-based financial statement information. The findings show that IFRS implementation has favourably affected the financial performance (e.g. profitability and growth potential) of firms. The study provides evidence that firms are likely to provide voluntary IFRS disclosures. Key motives include size, growth, profitability and leverage, which appear to be more favourable for voluntary disclosers. The provision of voluntary IFRS disclosures in the pre-official adoption period has assisted voluntary disclosers in their IFRS adoption process. Following the fair value orientation of IFRSs, the transition to IFRSs appears to introduce volatility in key income statement and balance sheet figures. The study also demonstrates that IFRS adoption reduces the scope for earnings management and leads to more value relevant accounting measures