Title: Investigating capital structure through IAS 1: variations in disclosure and measurement

Authors: Hamilton Elkins; Gary Entwistle; Ganesh Vaidyanathan; Ilona Bastiaansen

Addresses: Edwards School of Business, University of Saskatchewan, PotashCorp Centre, 25 Campus Drive, Saskatoon, SK, S7N 5A7, Canada ' Edwards School of Business, University of Saskatchewan, PotashCorp Centre, 25 Campus Drive, Saskatoon, SK, S7N 5A7, Canada ' Edwards School of Business, University of Saskatchewan, PotashCorp Centre, 25 Campus Drive, Saskatoon, SK, S7N 5A7, Canada ' Edwards School of Business, University of Saskatchewan, PotashCorp Centre, 25 Campus Drive, Saskatoon, SK, S7N 5A7, Canada

Abstract: This study examines how a set of Canadian and German firms apply the quantitative capital disclosure requirements contained in IAS 1. We find significant inter-country differences in both the propensity to disclose a capital structure and in the form of the disclosure. Further, we find variation both within and between countries in the balance sheet elements used to construct the numerators and denominators of the capital structures. When we compare the ratios constructed from the various combinations of balance sheet elements, we find significant measurement differences, in some cases exceeding 10 percentage points. When we use the ratio constructions to generate cost of capital we also find significant differences, in more than half the cases exceeding a full percentage point. Overall, our results suggest that the significant variations in capital structure disclosures and measurements we identify are potentially value relevant information for users.

Keywords: capital structure; cost of capital; IAS 1; disclosure; variation; measurement; accounting; finance; international.

DOI: 10.1504/IJAF.2017.088028

International Journal of Accounting and Finance, 2017 Vol.7 No.3, pp.209 - 233

Received: 03 Jun 2016
Accepted: 29 May 2017
Published online: 17 Nov 2017 *

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