Academic Research Article #1
In Mary Barth, Wayne Landsman, Mark Lang, and Christopher Williams’ research article, “Are IFRS-based and US GAAP-based accounting amounts comparable?,” is primarily concerned with the comparability of IFRS adopted by non US firms as they compare with US GAAP applied by US firms.
There has been much debate on the convergence of IFRS and US GAAP reporting standards. As the world becomes more of a globalized economy, it becomes important for comparability to maintain efficient capital flow. While some firms utilize other forms of reporting, it requires investors to understand the differences in accounting amounts and the validity of some reporting standards. If non-US firms did implement IFRS, the thought is that it would increase value and improved confidence since IFRS is aligned with US GAAP, which is considered to be the gold standard in reporting. If non-US firms implement IFRS reporting standards, it may increase investor confidence and potentially better capital inflow. Investors, creditors, and other stakeholders are concerned with the comparability of different firms. However, the need for standardized, or at least comparable, standards is necessary in today’s globalization (Barth, Landsman, Lang, Williams, 2012).
These researchers utilized several key indicators, metrics, and tests to determine if the economic outcomes of the application of IFRS were more comparable to US GAAP. Utilizing equity indicators such as stock price, return, and earnings permits better analysis of equity value. The researchers also utilized cash flow in their analysis (Barth, Landsman, Lang, Williams, 2012)..
The researchers concluded that the implementation of IFRS standards, as opposed to non-US domestic standards, resulted in greater comparability to US GAAP. They also determined that IFRS provided a better accounting system and had better value relevance comparability to firms in the US.
Academic Research Article #2
In Christopher William’s article, “Asymmetric Respones to Earnings News: A Case for Ambiguity,” he discusses the effect of macro level events and investor’s primary responses. Specifically, Williams discussed the correlation between certain firm returns and macro uncertainty as well as indications of the effects of macro uncertainty by monitoring volume during the announcement of earnings (Williams, 2015).
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