Cross-Country Comparability at transition to IFRS – empirical evidence from Finland and Sweden

To increase comparability of financial information across EU Member States, the EU requires publicly traded companies to prepare consolidated financial reports in accordance with International Financial Reporting Standards (IFRS) since 2005. The findings of contemporary research indicate however, that the IFRS transition may be conditional on national institutions and culture. Using indices of comparability developed by Gray (1980), this study finds an overall significant positive effect on shareholders’ equity in Finnish and Swedish annualreports at IFRS transition in 2005. Further, findings from the matched-pairs sample study, which includes 74 Finnish and 74 Swedish annual reports for 2005, indicate significant differences in accounting policy choice across the two countries. This study adds to the growing literature on the financial statement effects of mandatory IFRS reporting, and proposes adoption strategy and the existence of an institutionalized accounting theory in Finland as possible reasons for a persisting lack of cross-country comparability of financial information.