The effects of IFRS on net income and earnings componentsvalue relevance, persistence, and predictive value

  1. M. Fuensanta Cutillas Gomariz 1
  2. Juan Pedro Sánchez Ballesta 1
  3. José Yagüe 1
  1. 1 Universidad de Murcia
    info

    Universidad de Murcia

    Murcia, España

    ROR https://ror.org/03p3aeb86

Revista:
Revista española de financiación y contabilidad

ISSN: 0210-2412

Any de publicació: 2016

Volum: 45

Número: 3

Pàgines: 365-388

Tipus: Article

DOI: 10.1080/02102412.2016.1198562 DIALNET GOOGLE SCHOLAR

Altres publicacions en: Revista española de financiación y contabilidad

Objectius de Desenvolupament Sostenible

Resum

We examine whether the switch to IFRS (International Financial Reporting Standards) has affected the value relevance and persistence of net income. In addition, since IFRS adoption has involved changes in the location of nonrecurring items in the income statement, we also examine whether these changes have influenced the value relevance, persistence, and predictive value of the main income measures. Using a sample of Spanish listed firms, we find an increase in the value relevance of net income and non-significant changes in its persistence after 2005. We also find that nonrecurring items were value relevant in the pre-adoption period and that the operating income is more value relevant after IFRS adoption. This suggests that the significant increase in the value relevance of operating income could be explained by the inclusion in this income measure of former extraordinary and special items. We also observe that the former extraordinary section under SAS (Spanish Accounting Standards) was persistent, whereas the income measure of net profit/loss from discontinued operations under IFRS is neither value relevant nor persistent. We do not find significant changes in the attributes of financial income, but we do observe an increase in the value relevance of other consolidated items and corporation tax after IFRS adoption.

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