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International Financial Reporting Standards and the value relevance of book value and earnings: the case of Tanzania

International Financial Reporting Standards and the value relevance of book value and earnings:... Accounting standards that are mostly compatible with International Financial Reporting Standards (IFRS) are required for consolidated financial statements of all listed firms in Tanzania starting from 2004 fiscal year end. Before that, financial reporting in Tanzania followed the local-GAAP and financial reporting standards issued by the National Board of Accountants and Auditors (NBAA). Until 2004, all listed firms in Tanzania were preparing their financial statements in accordance with the local standards issued by the NBAA. In this study, I examine the relative and incremental value relevance of earnings and the book value of equity under Tanzania local-GAAP and Accounting Standards (1997–2004) and under IFRS (2005–2012) for three Tanzanian listed firms in the manufacturing sector. I compare these two periods to investigate whether the mandatory adoption of IFRS increase relevance of earnings and book value of equity which are accepted as proxies of accounting quality. I find evidence that the value relevance of earnings and book value of equity has increased significantly after adopting IFRS. In addition, I find that the incremental value relevance of earnings increased between the local NBAA accounting standards period and the IFRS period. However, the incremental value relevance of book value of equity decreased in the same period. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png African Journal of Accounting, Auditing and Finance Inderscience Publishers

International Financial Reporting Standards and the value relevance of book value and earnings: the case of Tanzania

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Publisher
Inderscience Publishers
Copyright
Copyright © Inderscience Enterprises Ltd. All rights reserved
ISSN
2046-8083
eISSN
2046-8091
DOI
10.1504/AJAAF.2014.068189
Publisher site
See Article on Publisher Site

Abstract

Accounting standards that are mostly compatible with International Financial Reporting Standards (IFRS) are required for consolidated financial statements of all listed firms in Tanzania starting from 2004 fiscal year end. Before that, financial reporting in Tanzania followed the local-GAAP and financial reporting standards issued by the National Board of Accountants and Auditors (NBAA). Until 2004, all listed firms in Tanzania were preparing their financial statements in accordance with the local standards issued by the NBAA. In this study, I examine the relative and incremental value relevance of earnings and the book value of equity under Tanzania local-GAAP and Accounting Standards (1997–2004) and under IFRS (2005–2012) for three Tanzanian listed firms in the manufacturing sector. I compare these two periods to investigate whether the mandatory adoption of IFRS increase relevance of earnings and book value of equity which are accepted as proxies of accounting quality. I find evidence that the value relevance of earnings and book value of equity has increased significantly after adopting IFRS. In addition, I find that the incremental value relevance of earnings increased between the local NBAA accounting standards period and the IFRS period. However, the incremental value relevance of book value of equity decreased in the same period.

Journal

African Journal of Accounting, Auditing and FinanceInderscience Publishers

Published: Jan 1, 2014

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