Abstract

K－IFRS, which is significantly different from the previous K－GAAP, is applied to the KOSPI market and the KOSDAQ market in terms of valuation methods and disclosures of assets and liabilities. Therefore, in this study, we show how the value relevance of accounting information changes when K－GAAP is changed to K－IFRS. In this study, we selected 560 sample firms out of the stocks listed on the Korea Exchange’s stock market as of December 2011, and demonstrated a regression model based on Ohlson(1995)’s linear valuation function. The results of the study are as follows. First, if the corporate accounting standard is changed from K－GAAP to K－IFRS, the value relevance of earning and the associated value of book value and earning decrease significantly. Next, if the accounting standard is changed from K－ GAAP to K－IFRS, the incremental explanatory power of book value is significantly increased but the incremental explanatory power of earning is slightly decreased appear. Finally, when the accounting standard is changed from K－GAAP to K－IFRS, the ratio of incremental explanatory power of net assets (＝incremental explanatory power of net assets÷incremental explanatory power of net profit) is significantly increased. In this study, we show that the proportion of net assets in valuation increases and the proportion of net profit decreases when K－GAAP is changed to K－IFRS.

Keywords

• K－IFRS
• K－GAAP
• value relevance
• combined value relevance
• incremental explanatory power of book value
• incremental explanatory power of earning

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