DOI

10.17077/etd.sj215cbh

Document Type

Dissertation

Date of Degree

Spring 2012

Degree Name

PhD (Doctor of Philosophy)

Degree In

Business Administration

First Advisor

Collins, Daniel

First Committee Member

DeJong, Douglas

Second Committee Member

Hribar, Paul

Third Committee Member

Lie, Erik

Fourth Committee Member

Mergenthaler, Richard

Abstract

IFRS allows firms to choose between fair-value accounting and historical cost accounting with impairment testing for property, plant and equipment (PPE). This study examines the effect of firms' accounting choices for this group of non-financial assets on over-investment after IFRS mandatory adoption in the European Union (EU). My results indicate that over-investment in PPE (or capital expenditures) is lower following IFRS adoption among EU firms that used historical cost accounting with impairment testing in the post-IFRS period, consistent with EU firms having more timely loss recognition for PPE under IFRS strict impairment rules. In my analysis of United Kingdom (UK) firms, I find that most UK firms elected to use historical cost accounting with impairment testing for PPE after IFRS mandatory adoption. I also find that UK firms that previously used fair-value accounting under UK GAAP and then switched to historical cost accounting with impairment testing under IFRS exhibit greater reductions in over-investment relative to other EU firms that used historical cost accounting with impairment testing prior to IFRS adoption. Additional analysis suggests that the reductions in over-investment after IFRS mandatory adoption are greater as the severity of agency conflicts increases, consistent with outside shareholders demanding timely loss recognition as a means of addressing agency conflicts with managers.

Keywords

fair-value, historical cost, IFRS, impairment, property, plant and equipment, timely loss recognition

Pages

v, 59 pages

Bibliography

Includes bibliographical references (pages 54-59).

Copyright

Copyright 2012 Mohamad Mazboudi

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