Discussion of ‘The impact of the adoption of IFRS 11 on the comparability of accounting information’

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Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 The Preface to International Financial Reporting Standards can be found at the beginning of each edition of IFRS Standards, Part A: Issued Standards and the Conceptual Framework for Financial Reporting.

2 As explained by SSLB in the Introduction to their paper, under guidance superseded by IFRS 11, an entity could, as a matter of accounting policy choice, apply either proportionate consolidation or the equity method to account for its interests in joint ventures. IFRS 11 requires the equity method to be used for all joint ventures.

3 One purpose of IFRS 12 was to provide disclosures that would rectify this loss of information.

4 Section 2.1 of SSLB summarises the arguments for and against proportionate consolidation.

5 SSLB use a difference-in-differences (DiD) design. The first difference is comparability of control vs treatment firms before IFRS 11 (the pre-period). The second difference is comparability of control vs treatment firms after IFRS 11 (the post-period). Under the null hypothesis of no comparability effects from adopting IFRS 11, there is no change in the post-period comparability difference between treatment and control firms as compared to the pre-period comparability difference. One assumption of the DiD design is that firms are not pre-selected into treatment and control groups; that assumption is not met in this setting.

6 These are expressions (2), (3) and (4) in SSLB slightly edited to facilitate readability.

7 SSLB correctly note that the comparability measures they use are standard in empirical accounting research and refer to but do not explore both of these practical empirical questions.

8 SSLB apply statistical cluster analysis to their 26 sample countries to create seven clusters based on similarities in 12 cultural and institutional characteristics. Figure 2 and Section 3.3.5.1 of the paper describe the composition of the seven clusters which contain, roughly speaking (1) African countries and the Philippines; (2) Continental Europe; (3) the UK and similar countries; (4) Latin American countries; (5) Nordic countries; (6) Hong Kong; (7) Middle East/Asia, comprising Kuwait, Malaysia, Sri Lanka and Turkey.

9 This possibility is indicated but not explored in Section 2.1 of SSLB and in the example cited in their footnote 1.