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Have IFRS changed how stock prices are associated with earnings and book values? Evidence from Norway

Leif Atle Beisland (Department of Accounting and Finance, University of Agder, Kristiansand, Norway)
Kjell Henry Knivsflå (Norwegian School of Economics, Bergen, Norway)

Review of Accounting and Finance

ISSN: 1475-7702

Article publication date: 9 February 2015




The purpose of this paper is to examine how the mandatory shift from Norwegian Generally Accepted Accounting Principles (NGAAP) to International Financial Reporting Standards (IFRS) in Norway affected the valuation weights of earnings and book values, with the aim of gaining insights that are relevant for standard setters, investors and other users of accounting information.


The authors extend the IFRS literature on structural shifts between the pre- and post-adoption periods by comprehensively controlling for factors that vary between the IFRS sample and the domestic Generally Accepted Accounting Principles (GAAP) sample. Moreover, the tests are designed to reveal the underlying accounting causes of the observed differences in value relevance.


IFRS are balance sheet-oriented and emphasize measurement at fair value. By contrast, NGAAP are earnings-oriented and focus on historical cost. IFRS also differ from NGAAP by recognizing more intangible assets. Overall, IFRS are thus less conservative than NGAAP. It was found that expanded fair value accounting increases the value relevance of book values and decreases the value relevance of earnings. However, the improved matching of intangible asset expenditures with the future economic benefits of such intangible assets increases the persistence and value relevance of earnings relative to book values.


This paper introduces a test methodology that is designed to identify the effects that specific accounting differences between the IFRS sample and the domestic GAAP sample have on value relevance. Consequently, this paper not only identifies the overall effects on value relevance but also contributes to the literature by identifying specific accounting differences between IFRS and GAAP that cause these overall effects, and thus obtain insights that are valuable for standard setters and other users of accounting information.



Thanks to Frøystein Gjesdal, John Christian Langli, Peder Fredslund Möller, Ken Peasnell, Frank Thinggaard and seminar participants at the 33rd EAA Annual Conference and the 1st Nordic Accounting Conference for their helpful comments on earlier versions of this study.


Beisland, L.A. and Knivsflå, K.H. (2015), "Have IFRS changed how stock prices are associated with earnings and book values? Evidence from Norway", Review of Accounting and Finance, Vol. 14 No. 1, pp. 41-63.



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