Predictive Ability for US GAAP and IFRS

The transition towards a set of high quality global standards is well under way with over 120 countries adopting International Financial Reporting Standards(IFRS). The United States (US) has taken a significant step towards adopting IFRS by accepting financial statements prepared with IFRS from foreign listed companies in domestic stock exchanges. This study adds to the earnings quality literature regarding predictive ability by comparing IFRS and US Generally Accepted Accounting Principles (US GAAP).;The predictive ability of disaggregated earnings prepared with IFRS in forecasting future cash flows in a single research setting under SEC jurisdiction is examined. This research evaluates financial statements of Canadian filers in the US prior to and after adoption of ¡FRS. Results show no statistical difference in the overall predictive ability of IFRS and US GAAP however differences in the way the prediction is made are discovered. Inconsistencies with the predictive literature as to the importance of accruals in aiding predictive ability are found.;Keywords: IFRS, US GAAP, Canadian GAAP, Predictive Ability, Earnings Quality.