Relevance of Differences between Net Income based on IFRS and Domestic Standards for European Firms: RELEVANCE OF IFRS AND DOMESTIC GAAP NET INCOME DIFFERENCES

Net income adjustments resulting from mandatory 2005 IFRS adoption in Europe are value relevant for financial and non-financial firms. Differences in relevance of the aggregate adjustment and adjustments related to several IFRS standards, for financial and non-financial firms and across country groups, suggest differences in domestic standards and institutions affect investors� assessment of the relevance of IFRS accounting amounts. Despite these differences, except for French/German non-financial firms, investors view net income measured using IAS 39 Financial Instruments: Recognition and Measurement as more relevant than that measured using domestic standards, which is notable because IAS 39 was highly controversial in Europe.