Impact of Voluntary IFRS Adoption on Accounting Figures: Evidence from Japan

Using a sample of Japanese firms, we investigate the impact of the voluntary adoption of International Financial Reporting Standards (IFRS) on accounting figures. To control institutional factors, we manually collected two sets of accounting figures prepared by the same firm and for the same fiscal year from reconciliation statements required by IFRS 1. We find that net income is significantly higher under IFRS than under Japanese generally accepted accounting principles (J-GAAP), while equity is not significantly affected by the adoption of IFRS. We also find that the implementations of some accounting standards (e.g., accounting standards for goodwill, intangible assets, and employee benefits) significantly impact both equity and net income. We further find that voluntary IFRS adopters show a higher goodwill ratio (goodwill/total assets) than J-GAAP adopters and that this goodwill ratio positively correlates with the impact of IFRS 3 (Business Combinations) on equity. These results indicate that, despite the global demand for convergence of local GAAP with IFRS, the differences in fundamental concepts between IFRS and local GAAP still remain.