The effect of mandatory IFRS adoption on accounting conservatism of reported earnings Evidence from Chilean firms

Purpose - The authors aim to analyze whether the adoption of IFRS accounting standards in Chilean capital markets affects the earnings conservatism of the firms that adopt them. Design/methodology/approach - Using a conditional earnings conservatism model, the authors compare the conservatism of the firms by periods of using or not using IFRS standards for a sample of 95 listed Chilean firms between 1999 and 2010. Findings - The authors' results show that conditional earnings conservatism is more pronounced under lFRS standards and suggest that the use of IFRS improves the relevance and reliability of the reported accounting information. Originality/value - The authors provide new evidence from a Latin-American emerging market and they shed some light on the potential effect of lFRS implementation for several Latin-American countries that are in the on-going process of convergence.