The impact of international financial reporting standards: does size matter?

PURPOSE - This study seeks to examine the impact of Australian equivalents to international financial reporting standards (A-IFRS) on the accounts of small-, medium- and large-sized firms. DESIGN/ METHODOLOGY/ APPROACH - For 135 listed Australian entities, the half-yearly accounts ended 30 June 2005 are examined to identify the effects of A-IFRS. Data are gathered on the change in major balance sheet and income statement elements, the major reconciling items and earnings variability. FINDINGS - Findings show that more than half of small firms have no change in net income or equity from A-IFRS, and that there is an increase in the number of adjustments to net income and equity with firm size. The study also finds that A-IFRS has increased net income for small- and medium-sized firms. Equity has increased (decreased) under A-IFRS for small (large) firms. Small firms experience higher earnings variability than medium-sized or large firms under A-IFRS. RESEARCH LIMITATIONS / IMPLICATIONS - The sample is limited to 31 December reporting date firms and not all A-IFRS must be complied with when firms restate their comparatives. PRACTICAL IMPLICATIONS - Analysts, auditors and other account users should be aware that the effects of A-IFRS are correlated with firm size. ORIGINALITY / VALUE - This is the first Australian empirical paper on the effects of A-IFRS. It raises doubts about the contentions of some that A-IFRS will have widespread adverse effects on firms accounts.