Conservatism of earnings reported under International Accounting Standards: A comparative study

In this study we analyse whether the use of IASB standards affects the conservatism of earnings of the firms that adopt them. We compare the conservatism of firms by groups of firms/countries using or not IAS. Our results show that 1) Earnings conservatism is, as pointed out in prior research, more pronounced in common-law-based developed economies; 2) The voluntary use of IASB standards in Europe (prior to 2005) has significantly increased the measures of earnings conservatism in adopting firms, and 3) The use of IAS fails to improve the relevance and reliability of accounting information in emerging/developing countries, where enforcement and investor protection is low.