The Impact of Mandatory IFRS Adoption on Conditional Conservatism in Jordan

Omar Shaher Arabiat, Basheer Ahmad Khamees


This study investigates the impact of the mandatory adoption of (IAS/IFRS) in Jordan on conditional conservatism. Three measures of conditional conservatism are used: The modified Basu (1997) measure (Ball and Shivakumar, 2005), the (Khan and Watts, 2009) measure which takes into account a set of firm characteristics, and a measure controlling for the potential shifts in unconditional conservatism and cost of capital after the adoption of (IAS/ IFRS) (Andre, et al., 2013). This study applies fundamental analysis on the Jordanian companies listed in Amman Bourse over the period 2002 to 2007. Regression analysis was used to achieve the goals of the study. The results reveal an overall decline in conditional conservatism over the three measures. Moreover, the results reveal that the reduction in conditional conservatism after the adoption of (IAS/IFRS) is more significant for firms that report in their balance sheets; intangible assets, and the impairment of goodwill. The researchers recommend applying the conditional conservatism principles in a way that help the Jordanian companies to reach the level of conservatism targeted by the IASB. In addition, the researchers emphasize the importance of properly applying and enforcing the main mechanism that ensures the conditional conservatism, which is the impairment test


IAS, IFRS, Conditional Conservatism, Unconditional Conservatism, Cost of Capital, Intangible Assets, Goodwill, Impairment, Jordan.


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