The purpose of this paper is to provide evidence of the effect of the differences related to reporting inventory, property plant and equipment, intangible assets, and development costs between International Financial Reporting Standards (IFRS) and US Generally Accepted Accounting Principles (US GAAP) companies.
Both univariate tests (t‐tests) and multivariate tests (ANOVA, probit and logit analyses) are used to compare the ratios between IFRS and US GAAP companies.
Results consistently show that IFRS‐country firms have a significantly higher current ratio, a significantly lower asset turnover ratio, and a significantly lower debt‐to‐asset ratio.
This paper only focuses on inventory, property plant and equipment, intangible assets, and development costs. Other financial variables are not considered.
The results are useful for individuals who are interested in reporting and investing in countries using different financial reporting systems.
This paper is a timely examination of the recent emphasis of mandating IFRS.
