Accounting Choice under IFRS: The Role of Accounting Tradition and Managerial Opportunism

Abstract

The present study investigates the role of accounting tradition and managerial opportunism when companies are given by IFRS the option to choose whether to book accounting items following the historical cost or the fair value method. We hypothesize that accounting tradition still plays a role in the choice, with Continental European companies preferring the historical cost and the Anglo-Saxon companies choosing more often the fair value. We also hypothesize that managers will act opportunistically, choosing the historical cost or the fair value method in order to influence the performance of the company and/or their remuneration. By using a hand-collected sample of 480 companies belonging to Continental Europe (Italy, Germany and France) and Anglo-Saxon countries (United Kingdom and Australia) we find support for the first hypothesis while we reject the second hypothesis. Accounting tradition does still play a role in the accounting choice, while managerial opportunism does not.