IFRS: Beyond the Standards

Abstract

EXECUTIVE SUMMARY * Research suggests that cultural differences cause accountants in different countries to interpret and apply accounting standards differently, This research reveals that two accounting values directly influenced by national culture are conservatism and secrecy, which affect the measurement and disclosure of financial information in financial reports and have the greatest potential to affect cross-border financial statement comparability. * Translation of IFRS into various languages poses another threat to comparability. official working language of the IASB, and the language in which IFRS is published, is English. For non-English speaking accountants to have access to IFRS, it is translated into other languages. * It will be important for multinational corporations and global audit firms to strengthen cultural awareness training. This could benefit multinational corporations and their auditors by making them aware of potential biases held by their international staff and by colleagues in their international offices, and by helping professionals recognize their own country's cultural accounting tendencies and better understand how these values affect their own interpretations and judgments. * IASCF must enhance the translation process to ensure that inconsistencies are avoided. In addition, the IASB could reduce the potential for distorted translation by exercising greater care in avoiding the use of ambiguous English words and phrases that require translators to make assumptions about the intended meaning. ********** [ILLUSTRATION OMITTED] Since the European Union's 2002 regulation mandating IFRS for EU public companies and the execution of the Norwalk Agreement by FASB and the International Accounting Standards Board (IASB), momentum has been building for global standards convergence. Currently, more than 100 countries have adopted IFRS, and a number of other economically important countries, including Japan and the United States, have programs in place to converge their national standards with IFRS. IASB Chairman Sir David Tweedie has said that by December 2011, U.S. GAAP and IFRS should be pretty much the same. At that point, about 150 countries would be using very similar accounting standards, though some countries have adopted versions of IFRS that vary from IFRS as published by the IASB. In 2007 the SEC extended the question beyond mere convergence by accepting the English language version of IFRS by foreign issuers without reconciliation. And in November the SEC released a proposed road map that could require a phased adoption of IFRS by U.S. issuers beginning in 2014, dependent in part on whether seven milestones are achieved. In the road map, which has a comment period ending Feb. 19, it is noted that, The Commission has long expressed its support for a single set of high-quality global accounting standards as an important means of enhancing comparability. This article points out that even among countries that have adopted the same version of IFRS, recent accounting research suggests that two factors--national culture and language translation--could undermine the rigorous interpretation and application of IFRS and lead to a lack of comparability across countries. objective of this article is to highlight two significant hurdles that impede the consistent interpretation and application of converged standards: the influence of national culture on the interpretation of standards and the difficulty of translating standards into other languages. CULTURE Research suggests that cultural differences cause accountants in different countries to interpret and apply accounting standards differently This research reveals that two accounting values directly influenced by national culture are conservatism and secrecy, which affect the measurement and disclosure of financial information in financial reports and have the greatest potential to affect cross-border financial statement comparability underlying framework helping to explain these findings is based upon one of the largest cross-cultural surveys ever conducted. …

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