An analysis of methods to measure the comparability of the consolidated financial statements of the European listed companies

Since 2005, all listed European companies have to apply the International Financial Reporting Standards (IFRS) to prepare their consolidated financial statements. Users might get the impression that these financial statements are fully comparable now. However, differences in application of IFRS can still exist. These differences can have a negative impact on the comparability of the financial statements. Comparability can be looked at from the viewpoint of preparers, users and standard setters. The goal of this paper is to find a way to measure the comparability of the consolidated financial statements of the European listed companies looked at from the viewpoint of users. Therefore, this paper first discusses the term comparability and the uniformity-flexibility dilemma. Secondly, the different measurement methods that have been developed so far such as the H, C, I, V and T index, the Jaccard coefficient, the simple chi-square test and three different hierarchies of nested statistical models are analysed. After discussing these different measurement methods, the T index seems to be the most appropriate one for the purpose of this research.