Changes in the Value Relevance of R&D Expenses after IFRS Adoption PDF Download

Author: James Jianxin Gong
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Languages : en
Pages : 48

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Book Description
We investigate whether the nature of differences between national GAAP and IFRS is associated with differential changes in the value relevance of Ramp;D expenses after the adoption of IFRS across countries. Using a difference-in-differences study on a sample of public companies in nine countries that covers pre-IFRS and post-IFRS periods during 1997-2012, we find that the value relevance of Ramp;D expenses declines after IFRS adoption in countries that previously mandated immediate expensing or allowed optional capitalization of Ramp;D costs. On the contrary, there is no change in the value relevance of Ramp;D expenses for countries that switched from the mandatory capitalization rule to IFRS. We also investigate the moderating effects of national institutions on the changes in the value relevance of Ramp;D expenses after IFRS adoption. We find that in countries with stronger investor protection, the changes in the value relevance of Ramp;D expenses are larger. In addition, changes in the value relevance of Ramp;D expenses are smaller for countries whose national culture is characterized by higher uncertainty avoidance. Our findings highlight the importance of both accounting standards and national institutions in explaining the changes in the value relevance of accounting information after IFRS adoption.