Accounting comparability and firm's reputation. An exploration of the Italian experience for joint controlled entities

The objective of this paper is to investigate the effects of the IFRS adoption on the comparability of accounting information for reporting interests in joint controlled entities (JCEs) and to explore the relation between the accounting choices and the related price earning ratio (P/E). It is intended to capture to what extent the level of comparability in financial reporting practice has increased after the mandatory introduction of IFRS, since differences could still exist in the application. To provide some evidence, the case study of Italy has been used. We test whether comparability within country (as measured by van der Tas H index) in policy choices has changed in relation to the application of IFRS. Harmonization will be measured with regard to the valuation of the participating in joint ventures since it is a good topic. The data source is the Italian listed companies consolidated financial statements for the period 2006-2010. The question is: Do de jure harmonized accounting standards lead to the comparability in accounting practices? First results seems to limit the hoped comparability for the specific topic of joint venture. Hence, after measuring comparability, we explore and describe the relation between the application of Proportionate consolidation or Equity method for interests in joint controlled entities (JCEs) and the related price earning ratio, as a measure of the firm’s reputation. First remarks show that the market seems not affected by the lack of convergence.