The qualitative characteristics of financial information, and managers’ accounting decisions: evidence from IFRS policy changes

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This is the first empirical study that uses publicly available data to provide direct evidence about the role of the qualitative characteristics (QCs) of financial information in managements’ accounting decisions. Based on 40,895 hand-collected IFRS policy choices on 16 topics made by 514 large firms of 10 jurisdictions in the period 2005–2011, we identify 204 reasons for policy changes. The majority of these refer to QCs from the conceptual framework of the standard-setter, in particular to relevance, faithful representation, comparability and understandability. Firms also frequently refer to transparency, which is not directly mentioned in the framework. Furthermore, we analyse the circumstances under which firms explain their policy changes in terms of improved quality. We hypothesise and find that QCs are more often referred to if the change relates to measurement (i.e. to a more important accounting policy decision). We also find that references to QCs are positively associated both with firm size and with a measure of a jurisdiction’s transparency. This complements previous research by providing evidence that managers are, at the least, alert to QCs.
Original languageEnglish
Pages (from-to)572-601
Number of pages30
JournalAccounting and Business Research
Issue number5
Early online date3 Aug 2015
Publication statusPublished - 2015


  • qualitative characteristics; IFRS; relevance; faithful representation; comparability, understandability; transparency

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