The Effects of IFRS Adoption on Tax Expense and its Information Content: Canadian Evidence

Abstract

This paper examines whether tax expense and its information content have changed after Canadian firms adopted IFRS in 2011. Inspired by the concept of orthogonalization, this paper proposes a new measure for incremental information content to mitigate the multicollinearity among highly correlated accounting variables. The main analysis and robustness tests show that tax expense and its information content have not changed significantly during the transition to IFRS in Canada, while the average effective tax rate increased by 1.5 percent for the post-IFRS period.