MEASUREMENT OF FINANCIAL REPORTING QUALITY BASED ON IFRS CONCEPTUAL FRAMEWORK'S FUNDAMENTAL QUALITATIVE CHARACTERISTICS

Abstract

The IASB creates the standards and the conceptual framework in an attempt to create higher quality financial statements. Through this article, the extent to which this objective has been achieved is examined. An important characteristic of this research is the fact that the quality of financial statements is examined in light of the Conceptual Framework. Specifically, the two fundamental qualitative characteristics - relevance and faithful representation (reliability) - set by the IAS Committee through the Conceptual Framework are examined. Additionally, this article highlights the conflict between the existing methods for measuring reliability and the faithful representation, as defined by the Conceptual Framework. The degree of relevance and reliability is measured by the usage of four alternative regression models. The sample of this research consists of listed companies of fifteen European countries that have adopted IFRS mandatorily and the time horizon that is investigated is 10 years, from 2000 until 2009. Specifically, the period between 2000 and 2004 is defined as the period before the adoption, while the period between 2005 and 2009 is defined as the period after the adoption. Generally, the findings that are obtained support an increase in relevance, while the reliability seems to be unchanged. Journal: European Journal of Accounting, Finance and Business