Lisa Evans

Language, translation and the problem of international accounting communication

The use of technical terms to communicate accounting information can lead to misunderstandings when the meaning of such terms is not fully appreciated by the recipient of the information. The discipline of translation studies suggests that full equivalence in translation between languages is rare. This suggests that the risk of misunderstanding is exacerbated when technical terms are translated into another language. This paper examines the implications of mistranslations of technical terms in the context of theories from linguistics, which suggest that language influences the way we think. It uses three examples of accounting terminology to illustrate these problems. It concludes that the choice of an inappropriate label in the translation of accounting terminology is detrimental to international accounting communication and creates problems for users and preparers of translated financial statements as well as for researchers in, and students of, international accounting and for those involved in harmonisation and standardisation of accounting.

Problems and Opportunities of an International Financial Reporting Standard for Small and Medium-sized Entities. The EAA FRSC's Comment on the IASB's Discussion Paper

Abstract In June 2004 the IASB issued the Discussion Paper ‘Preliminary Views on Accounting Standards for Small and Medium-Sized Entities’. This invited comments on the central question of whether the IASB should develop separate standards for small and medium-sized enterprises (SMEs), and on further issues and questions arising from this. This paper briefly introduces the background to the publication of the Discussion Paper. This is followed by a review of prior literature on SME financial reporting implications, prepared by the European Accounting Associations Financial Reporting Standards Committee as the basis of its response to the Discussion Paper. The paper concludes with a brief summary of events and issues arising since the end of the consultation period.

Comparison of Two Methods for Measuring Compliance with IFRS Mandatory Disclosure Requirements

Purpose - The purpose of this research is to highlight the differences, and implications of any differences, between two approaches to measuring compliance with International Financial Reporting Standards (IFRS) mandatory disclosure requirements: the commonly used “dichotomous” approach; and the alternative, but rarely used, partial compliance unweighted approach. The former gives equal weight to the individual items required to be disclosed by all standards. The latter assumes that each standard is of equal importance and consequently gives equal weight to each standard. Design/methodology/approach - The paper employs both methods on a sample of companies. We then compare the results deriving from the application of the two methods and statistically test their differences. Findings - It is found that the two methods produce significantly different overall and relative (i.e. ranking order) compliance scores. Practical implications - This paper should alert researchers to the implications of using either method. Additionally, it highlights the need for academics and/or practitioners to be cautious when interpreting the findings of prior studies on compliance with IFRS mandatory disclosure requirements. Since the two methods produce significantly different compliance scores, findings regarding the variables associated with compliance may differ, depending on the disclosure index method followed. The paper suggests that simultaneous application of both methods would result in more robust findings in future research. Originality/value - This is the first study to compare the results produced by applying both methods and statistically test their differences. The research methods explored are in particular relevant for policy-oriented, international accounting research.

The true and fair view and the ‘fair presentation’ override of IAS 1

Abstract This paper examines the ‘fair presentation’ requirement and the override in International Accounting Standard 1. The papers objective is to attempt an explication of the nature, role and status of the override and to make recommendations regarding its application. The author examines the wording of the relevant provisions in IAS 1 and compares and contrasts these with other regulation containing similar concepts, such as the European Unions fourth directive, UK and German law and US regulation. The ensuing discussion is centred around three interrelated themes: the hierarchies of (legal) rules in different legal systems, the relationship of ‘fair presentation’ to IASC/B pronouncements and the status of the override in IAS 1. It is argued that the override is considerably weaker than the true and fair view override in the EUs fourth directive and the UKs Companies Act, and that its role is not likely to go beyond that of a legal residual clause. The paper finally provides some initial evidence that the override is likely to be interpreted in this way in at least some countries, and recommends that a wider interpretation should not be sanctioned by the International Accounting Standards Board, nor by those charged with the enforcement of International Accounting Standards.

Harmonization relating to auditor independence: the Eighth Directive, the UK and Germany

The European Union Eighth Directive on the approval of auditors covers auditor independence only to a very limited extent. The provisions in the five articles on this subject are far less detailed than they were in the drafts of the directive, so that almost all specific regulation is left to the Member States. An examination of the development of the articles dealing with independence and integrity shows how the need to compromise, in order to reach an agreement, frustrated the intentions of the harmonizers. This paper traces the development of the independence rules in the Eighth Directive from the avant projet through the drafts to the final directive. It assesses the extent to which pre-Eighth Directive regulation in the UK and Germany may have affected the directive and then examines the implementation of the directive in the two countries. It concludes that national culture and accounting traditions prevented harmonization of independence rules through the Eighth Directive.

Comment on the IASB's Exposure Draft ‘IFRS for Small and Medium-Sized Entities’1

Abstract In February 2007 the IASB invited comments on its Exposure Draft of a proposed IFRS for Small and Medium-Sized Entities. The deadline for comments was 30 November 2007. Below we reproduce3 the comment letter prepared by the European Accounting Associations Financial Reporting Standards Committee (EAA FRSC). This is a follow up of the EAA FRSCs comment letter prepared in response to the IASBs Discussion Paper on ‘Preliminary Views on Accounting Standards for Small and Medium-Sized Entities’, published in 2005. Our comment is structured as follows: we initially sketch the background to the development of the Exposure Draft. We then revisit the key issues arising from our previous comment letter. This is followed by a survey of relevant literature published since the Discussion Paper. We then briefly address the questions raised by the IASB in the context of the Exposure Draft, before summarising the key issues arising from the literature which we consider relevant to the IASBs project.

Observations on the changing language of accounting

The meaning of words can change over time. In addition, new words may enter a language, sometimes replacing other words. This article extends prior literature on language change in accounting by drawing to a larger extent on theories from linguistics, and by placing greater emphasis on mechanisms of and motivations for change. Particular emphasis is placed on the need to verbalize new concepts, and sociocultural change. The latter is illustrated with examples from the development of accounting as an occupational interest group, and the adoption of Anglo-American accounting terminology and culture. The article concludes that language change in accounting, including transmission between languages and cultures, can inform accounting historians about the transfer of technical developments, as well as about socio-economic, political or ideological processes, power relationships, and the importance of terminology in jurisdictional disputes.

Performance Reporting – The IASB's Proposed Formats of Financial Statements in the Exposure Draft of IAS 1

ABSTRACT This paper is a response to the exposure draft of proposed amendments to IAS 1 Presentation of Financial Statements published by the International Accounting Standards Board (IASB) in March 2006. The objective is to bring to the standard setters attention research that is relevant to the issues raised in the exposure draft. We review analytic, empirical and experimental research that addresses the presentation of income and the format of the income statement. Overall, there is some support for a single statement of (total) recognised income and expense. However, net income is on average more relevant than comprehensive income, which may favour a two-statement approach. While this result is in line with the IASBs option of the two formats, it does not support the IASBs preference for a single statement.

The accountant's social background and stereotype in popular culture: The novels of Alexander Clark Smith

Purpose - The paper aims to explore the social origins of Scottish chartered accountants and the accounting stereotype as portrayed in popular fiction. Design/methodology/approach - The detective novels of the Scottish chartered accountant Alexander Clark Smith are used as a lens through which to explore the social origins of accountants and the changing popular representations of the accountant. Findings - The novels contribute to our understanding of the construction of accounting stereotypes and of the social origins of Scottish accountants. They suggest that, while working class access to the profession was a reality, so was class division within it. In addition, Smith was ahead of contemporary professional discourse in creating a protagonist who combines the positive aspects of the traditional stereotype with qualities of a private-eye action-hero, and who uses accounting skills to uncover corruption and address (social) wrongs. However, this unconventional portrayal may have been incongruent with the image the profession wished to portray. The public image (or stereotype) portrayed by its members would have been as important in signalling and maintaining the professions collective status as the recruitment of its leadership from social elites. Originality/value - Smiths portrayal of accountants in personal and societal settings at a time of profound social change, as well as his background in the Scottish profession, provide a rich source for the study of social origins of Scottish chartered accountancy during the first half of the twentieth century. Further, Smiths novels are of a popular genre, and innovative in the construction of their hero and of accounting itself; as such they merit attention because of their potential to influence the construction of the accounting stereotype(s) within the popular imagination.

IFRS Mandatory Disclosures in Malaysia: The Influence of Family Control and the Value (Ir)Relevance of Compliance Levels

Abstract We examine the effect of family control on IFRS mandatory disclosure levels, and the valuation implications of these disclosure levels, for Malaysian companies. We find that family control is related negatively to disclosure and that compliance levels are not value relevant. These findings suggest that agency theory predictions and theories linking common law legal systems to high quality financial reporting require refining in certain national contexts. Where Type 2 agency problems dominate, institutional arrangements intended to enhance financial reporting quality aimed at mitigating Type 1 problems in developed markets may have limited effect in less developed jurisdictions.