The value relevance of IAS reconciliation components: empirical evidence from Finland

This paper examines the value relevance of Local Accounting Standards (LAS) earnings and their voluntarily disclosed reconciliations to the International Accounting Standards (IAS). The empirical evidence is from Finland where, as discussed in our paper, restricted shares (available only to domestic investors) and unrestricted shares (available to both foreign and domestic investors) were listed separately during 1984± 1992. The ®ndings suggest that LAS earnings have signi®cant value relevance to both domestic and foreign investors. After controlling for LAS earnings, the aggregate reconciliation of LAS to IAS earnings does not provide signi®cant value relevance to either investor group. Tests of the individual reconciling items suggest that adjustments relating to untaxed reserves and consolidation di€erences have signi®cant value relevance to both domestic and foreign investors. Overall, our ®ndings indicate little di€erence between these investor groups with respect to the value relevance of LAS earnings and their reconciliations to IAS. Ó 2000 Elsevier Science Ltd. All rights reserved.