Abstract:
Background : Accounting was well known as a record keeping method and then evolved up to a
decision making tool. Therefore information which is generated through a systematic process plays a
vital role in decision making process, known as value relevance information. Accounting standards
direct the accounting function and IFRSs were implemented to have consistency of that information
around the world. Sri Lanka transformed from Sri Lanka Accounting Standards to IFRS since 01st
January 2012. Studies from many countries have been focused to measure the value relevance with their
transformation and concluded with different results. Hence this study will be a value creating study in
Sri Lankan context.
Aim : Accordingly this study attempts to identify the value relevance of IFRS adoption in Sri Lankan
listed companies.
Conceptual Framework : This study will evaluate the value relevance of IFRS adoption in Sri Lankan
listed companies. Therefore accounting information is taken as the independent information and market
price is considered as the dependent variable. Year-end book value per share and earnings per share are
used as the value relevant accounting information and share price at the date of publishing annual
reports to the public is taken as the market value. Size, growth and leverage of organisations are
considered as control variables which could have an impact on share price other than accounting
information.
Proposed Methodology : Population of the study consists 294 companies which is the total number of
companies listed in Colombo stock exchange as at 05th August 2015 and 167 companies are qualified
for the sample. Study period covers five years from 2010/11 to 2014/15 which is divided into two
namely pre-adoption period and post-adoption period to the IFRS implementation. Study will execute
price model in valuation to express the impact of accounting information to the market value and the
explanatory power of this model will be compared for above two periods.
Expected Outcome : The findings of this study will be beneficial for the users of accounting information
in common and specially for the investors who are mainly depend on available information. Further
study will be useful for regulators to measure the effectiveness of this implementation in Sri Lankan
context.