The Effect of K－IFRS on The Matching Principle

[Purpose]This study analyzes the effect of the adoption of International Financial Reporting Standards (IFRS) on the Matching Principle. The Matching Principle has long been considered a key concept in accrual－based accounting for evaluating firm performance. Since IFRS emphasizes an approach oriented toward the statement of financial position including the expanded use of fair value measurement, it may weaken the matching principle. However, considering that prior studies have shown that a higher degree of matching is associated with higher earnings quality, and given that IFRS was introduced to enhance accounting transparency and reliability, it is also possible that IFRS could strengthen revenue－expense matching. Therefore, this study seeks to verify the impact through empirical analysis. [Methodology]An OLS regression analysis was conducted using data from 13,295 firms listed on the Korea Exchange between 1992 and 2023, for which financial information was available. [Findings]First, based on the model of Dichev and Tang (2008), which regresses current revenue on expenses from the previous, current, and subsequent years, the standardized regression coefficient of current expenses is used to measure revenue－expense matching. The results indicate that revenue－expense matching improved after the adoption of IFRS.Second, using the adjusted R－squared from a regression of current revenue on current expenses, following Baek (2011b), a time－series trend analysis also shows that matching strengthened after the adoption of IFRS. [Implications]This study differs from prior research in that it directly examines the effect of IFRS adoption on the Matching Principle. It also contributes to the literature by empirically validating the effectiveness of IFRS in terms of earnings quality.