Accounting for Business Combinations - The Consequences of IFRS Adoption for UK Listed Companies

The study reports some evidence on the group accounting consequences of the implementation of IFRS in the UK. It examines how the adoption of IFRS has affected reported net profit and equity of UK listed companies. The contribution of the paper lays in reporting the evidence of the empirical consequences of the adoption of IFRS by identifying the underlying causes of these differences. These causes are not just identified at the level of individual standards but individual accounting procedures what allows for more thorough analysis. The data is derived from the IFRS 1 reconciliation requirement which provides the unique opportunity to compare the evidence of two different measurement bases for the same set of underlying economic events. The results show that goodwill treatment had the largest effect on reported profit resulting in the largest difference between IFRS and UK GAAP. There are however a variety of other group accounting effects.