Impact of Indian Accounting Standards on Expense-Revenue Matching Quality: An Industry-Level Analysis

Abstract

The study examines the industry-level impact of Indian Accounting Standards (Ind-AS), largely converged with International Financial Reporting Standards (IFRS), on the matching quality of expenses with revenues. Using matching-quality attributes, the study employs both a two-stage regression framework and a single-stage model, covering 31 industries (807 firms) and 45 industries (869 firms), respectively. The study evaluates changes in matching attributes over the initial post–Ind-AS period (2017–2019) and the later post–Ind-AS period (2019–2022), controlling for the COVID year (2020–2021). The results reveal heterogeneous industry-level effects of Ind-AS on matching quality under both approaches, reflecting sector-specific challenges and/or managerial discretion. During the initial post–Ind-AS period, significant improvements are observed in five industries under the two-stage approach and 10 industries under the single-stage approach, while one and seven industries, respectively, exhibit declines. In the subsequent post–Ind-AS period, evidence of learning effects emerges in four industries (two-stage) and five industries (single-stage) after controlling for COVID, whereas six industries (two-stage) and nine industries (single-stage) exhibit deterioration in matching quality. Few industries demonstrate consistent results across both regression approaches. Robustness tests incorporating exceptional items into total expenses reveal matching quality patterns consistent with possible classification shifting. The findings highlight the need for closer monitoring by regulators and for intervention by standard setters to enhance Ind-AS implementation, particularly in industries where matching quality has declined.