IMPACT OF CONVERGENCE APPROACHES TO IFRS ON THE VALUE RELEVANCE: AN ANALYSIS IN BRICS COUNTRIES
Name: RAFAEL ARREBOLA
Publication date: 21/02/2024
Examining board:
Name |
Role |
|---|---|
| ALFREDO SARLO NETO | Presidente |
| DIANE ROSSI MAXIMIANO REINA | Examinador Interno |
| PAULO ROBERTO BARBOSA LUSTOSA | Examinador Externo |
Summary: This research delves into the realm of emerging economies, specifically in the
countries that make up BRICS - Brazil, Russia, India, China, and South Africa. In this
context, the focus is on assessing the relevance of accounting information. During the
analyzed period, these countries chose to adopt different approaches to comply with
the International Financial Reporting Standards (IFRS). Thus, the central objective of
this study is to examine how the convergence approach has impacted the relevance
of financial information in these countries. To do so, the Ohlson methodology (1995)
adapted by Collins et al. (1997) was employed to evaluate the market value relevance
concerning profit and equity. The analysis is based on data from companies in these
countries collected after the adoption of IFRS up to the year 2022. The impact of
convergence approaches to IFRS on the relevance of accounting information was
tested through cross-sectional regression analysis in the post-IFRS implementation
periods in each country until the year 2022. The model is applied to each country,
allowing comparisons between countries and groups that followed similar patterns in
adopting the International Accounting Standards (IFRS). The central focus is to identify
if there is evidence of uniform maturity in the relevance of accounting information over
time among countries or groups with similar trajectories in converging to IFRS.
However, the results challenged these expectations, revealing that the different
approaches in implementing the standards did not clearly determine the evolution of
informational value. The first hypothesis expected to observe discrepancies in the
evolution of this relevance due to the different approaches in adopting IFRS. The
second hypothesis predicted uniform patterns in the evolution of relevance among
countries with similar approaches, while the third sought to identify similar patterns
among countries with divergent standards. However, the data did not support these
predictions, indicating that factors other than IFRS shaped the relationship between
accounting information and market value. The research findings contribute to
regulatory bodies promoting standards aimed at increasing the relevance of
accounting information, as in most BRICS countries, relevance decreases after the
adoption of IFRS. Investors, market analysts, and creditors should appropriately weigh
the significance of accounting information in their analyses, given its declining
relevance. The research also reveals that in the emerging markets of BRICS,
convergence approaches to IFRS do not impact the relevance of accounting information. This motivates the academic community to explore other variables that may influence this relevance.
