International Financial Reporting
Standards: what are the benefits?When countries have announced plans to adopt IFRS in lieu of the standards that had applied
previously, they have referred to a number of benefits, mostly to do with equity markets. So it is
not surprising that academics have looked to equity markets to assess the extent to which
benefits may have materialised. The evidence they have gathered can fairly be characterised
as mixed, partly because of differences in samples and the use of a wide range of proxies
for the same underlying but unobservable idea. Nonetheless, it seems relatively clear that
the shift to IFRS has had many consequences both for the valuation of equities and for
equity markets more generally. Although there will always be winners and losers from
changes in accounting standards, if only because of their distributive effects, undoubtedly
some consequences are regarded by companies and investors as, on balance, beneficial.
However, the story is far from complete. Ample scope remains to expand the range of
possible benefits that are investigated and to improve, substantially, the methods used to
seek them out.