Abstract
The comparability of IFRS financial statements is frequently discussed in literature and numerous
researches show that entities from different countries or with particular characteristics tend to use IFRS
differently. However, hidden reserves, i.e. the discrepancy between the historical book values and their fair
value counterparts, are usually not part of these investigations. Since we assume that hidden reserves can
be a reliable measure of comparability, the purpose of this paper is to examine if specific factors of a
company like size, country of origin or industry membership also indicate different odds to observe hidden
reserves. Analysing 456 purchase price allocations, we do indeed find evidence for our aforementioned
assumption. Our results show that the probability to observe hidden reserves under IFRS seems to be
dependent on certain factors. For instance, our results clearly indicate that large companies show hidden
reserves more frequently than small companies. We also find that entities from particular countries exhibit
significantly higher odds to hold hidden reserves than others. In consequence, we assume that the
comparability of financial statements under IFRS is still not achieved
GERNOT BRÄHLER, SEBASTIAN SCHMIDT. (2014) Drivers of Hidden Reserves – Consequences for the Comparability of Financial Statements Under IFRS, International Review of Management and Business Research, Volume 3, Issue 3.
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