International accounting differences and their relation to share prices: Evidence from U.K., Australian, and Canadian firms

Mary E. Barth, Greg Clinch

Research output: Contribution to journalArticlepeer-review

161 Citations (Scopus)

Abstract

We synthesize and extend research exploring differences between U.S. and other countries' Generally Accepted Accounting Principles (GAAP) by investigating whether differences between domestic and U.S. GAAP for U.S.-listėd U.K., Australian, and Canadian firms are associated with firms' returns and prices. The accounting differences we investigate include goodwill, asset revaluations, income taxes, pensions, interest capitalization, foreign currency, and extractive industries accounting. We conclude that goodwill is priced as an asset; that asset revaluations, successful efforts accounting for extractive industries, and immediate recognition of foreign currency exchange gains and losses on long-term assets and liabilities are generally uncorrelated with the information that investors consider relevant; that U.K., U.S., and Australian tax accounting methods do not recognize 'enough' tax expense or liability; and that accrual pension accounting and, in some specifications, interest capitalization add explanatory power beyond Australia's cash-based method. Our findings suggest that the U.S. Securities and Exchange Commission's (SEC's) required GAAP reconciliation reflects information useful to investors for U.K. and Australian firms, and to a more limited extent, for Canadian firms.

Original languageEnglish
Pages (from-to)135-170
Number of pages36
JournalContemporary Accounting Research
Volume13
Issue number1
DOIs
Publication statusPublished - 1 Jan 1996
Externally publishedYes

Fingerprint Dive into the research topics of 'International accounting differences and their relation to share prices: Evidence from U.K., Australian, and Canadian firms'. Together they form a unique fingerprint.

Cite this