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Corporate Disclosure Quality: Lessons from Australian Companies on the Impact of Adopting International Financial Reporting Standards

Corporate Disclosure Quality: Lessons from Australian Companies on the Impact of Adopting... For annual reporting periods beginning on or after 1 January 2005, Australian companies were required to comply with the Australian equivalents of International Financial Reporting Standards (AIFRS). To ensure a smooth transition, a broadly defined standard (AASB 1047) mandated pre‐adoption company disclosures of the AIFRS' impact. The standard provided managers with the opportunity to exercise considerable discretion in complying with the underlying disclosure requirements. We examine how this discretion impacted on the quality of pre‐adoption AIFRS disclosures provided by a sample of large Australian companies. Using a disclosure quality index, we find considerable evidence of a cross‐sectional variation in disclosure quality that varies according to differences in the AIFRS financial impact, size, industry and profitability factors. Importantly, we also observe individual Big 4 audit firm influences on disclosure quality. These findings highlight consequences of mandating corporate disclosures based on broadly defined principles. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Australian Accounting Review Wiley

Corporate Disclosure Quality: Lessons from Australian Companies on the Impact of Adopting International Financial Reporting Standards

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Publisher
Wiley
Copyright
© 2008 CPA Australia
ISSN
1035-6908
eISSN
1835-2561
DOI
10.1111/j.1835-2561.2008.0030.x
Publisher site
See Article on Publisher Site

Abstract

For annual reporting periods beginning on or after 1 January 2005, Australian companies were required to comply with the Australian equivalents of International Financial Reporting Standards (AIFRS). To ensure a smooth transition, a broadly defined standard (AASB 1047) mandated pre‐adoption company disclosures of the AIFRS' impact. The standard provided managers with the opportunity to exercise considerable discretion in complying with the underlying disclosure requirements. We examine how this discretion impacted on the quality of pre‐adoption AIFRS disclosures provided by a sample of large Australian companies. Using a disclosure quality index, we find considerable evidence of a cross‐sectional variation in disclosure quality that varies according to differences in the AIFRS financial impact, size, industry and profitability factors. Importantly, we also observe individual Big 4 audit firm influences on disclosure quality. These findings highlight consequences of mandating corporate disclosures based on broadly defined principles.

Journal

Australian Accounting Review – Wiley

Published: Sep 1, 2008

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