Information Asymmetry and Accounting Conservatism under IFRS Adoption

LaFond and Watts (2008) provide evidence that information asymmetry might be a determinant of accounting conservatism. One implication of their paper is that regulators trying to reduce information asymmetry by lowering the level of accounting conservatism might be wrong. However, there is a trend in moving away from conservative accounting. The typical example is IFRS adoption. Therefore, this paper studies information asymmetry and accounting conservatism under IFRS adoption. The results show that the level of accounting conservatism decreases after mandatory IFRS adoption, but the adoption of IFRS is likely to weaken the relationship between information asymmetry and accounting conservatism. Moreover, this paper investigates how the change of accounting conservatism under IFRS is related to the change in information environment. The finding shows that accounting conservatism increases information environment, supporting the idea that, by providing comparatively credible information, conservative accounting is beneficial to the information environment.

Place Card - Girl in Blue Dress on Yellow Chest

A place card with an illustration of a girl in a blue dress sitting on a yellow chest.

Place Card - Girl in Red Dress on Yellow Chest

A place card with an illustration of a girl in a red dress sitting on a yellow chest.

Key for the Oak Chest

The key is 4 1/2 cm long and is attached to a gold cord ending in a burnt orange tassel.

Oak Chest

Oak chest measuring 36 cm in height 45 cm in width and 32 cm in depth. The cabinet contains 5 graduating drawers and it closes with 2 hinged doors, each bearing an arch. There are recessed brass handles on the 2 sides of the cabinet and one of these handles on each of the drawers. On the top of the cabinet there is an escutcheon engraved with “S.D. Woodruff Esq., St. Catharines, 157 Ontario”. The cabinet has a lock which is still functional and opens with a skeleton key which is part of this collection. The top 2 drawers have been lined with a piece of cardboard carefully cut to size and covered with brocade. There is some scratching on the top of the cabinet and one of the front doors is missing some of the wooden trim.

Bill of landing (copy) for tea chest and boxes received at Port Hamilton

Bill of landing (copy) for tea chest and boxes received at Port Hamilton, Sept. 14, 1840.