Title: Reasons for the GAAP: a study of the magnitude and reasons for differences in reported net income between Swedish and US GAAP for Swedish companies before and after implementation of IFRS

Authors: Stellan Nilsson

Addresses: Dept. of Business Administration, Umea School of Business and Economics, Umea University, SE-901 87 Umea, Sweden

Abstract: Swedish accounting fully adopted the IFRS/IAS standards as from the beginning of 2005|s fiscal year, but the adoption of the IFRS/IAS had been an ongoing process since at least 1999. Several large Swedish firms have been listed on North American stock exchanges for some time, due mainly to the traditionally international focus of Swedish industry. Previous research has shown substantial differences between reported net income according to Swedish and US GAAP during the 1990s and the beginning of the 21st century. This study, using data reported in the company|s SEC 20-F reports, shows that the differences did not disappear when the firms adopted IAS/IFRS. This confirms the importance for future work on the harmonisation between IFRS and US GAAP. The differences are mainly connected with the different treatment of financial instruments, accounting for R&D expenditures, mergers and acquisitions (goodwill), translation gains/losses on consolidation, accounting for pensions and also accrual effects from partly eliminated differences in previous years. The relative importance of the formal differences in standards is not homogeneous among companies when it comes to the effects on reported income.

Keywords: accounting harmonisation; comparative accounting; IAS; IFRS; accounting differences; Sweden; USA; United States; GAAP; reported net income; accounting standards; International Financial Reporting Standards; International Accounting Standards.

DOI: 10.1504/JGBA.2009.023092

Journal for Global Business Advancement, 2009 Vol.2 No.1/2, pp.28 - 37

Published online: 09 Feb 2009 *

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