A Research Note on Understandability, Readability and Translatability of IFRS

Abstract

“Translations – of deep resonances and felt connections – are difficult, if not impossible, to make; one can learn another language, but acquiring all of the cultural accoutrements that accompany language is another story” (Bullaro, 2005).It is the objective of this study to review the nexus between Understandability, Translatability and Readability. Where communication serves specific purposes, for example in professions, highly specialized ‘dialects’ or varieties of language exist, referred to as 'languages for specific purposes.'Understandability is culturally bound and is not the same as translatability, although both depend on the expertise of the reader. Understandability of IFRS requires expert accounting knowledge, not only because the subject matter is accounting, but because accounting is a 'language for specific purposes'. Certainty that comes from the conservatism of such a specialized jargon enhances understandability for experts and specialists. There is also much research on readability of annual reports produced from the application of IFRS; but a key fundamental characteristic of the IFRS canon is understandability, not readability (to the disappointment of some non-expert users of the IFRS). Many such studies undertake analysis using some type of readability index; this is, most often, based on differential loadings applied to certain aspects of the text, aspects which could increase or decrease syntactical complexity; but the characteristics of understandability differ from any such readability measures.There is a particular scope for misunderstandings (and consequently a lack of understandability) where a confluence between professional bodies is required during the development of a sector-specific standard.This review of the characteristics of understandability, readability and translatability clarifies that there is a balance between these three characteristics of written IFRS text. Such a balance need to reviewed and considered without any lessening of the effectiveness of new standards to improve and effectively regulate financial reporting, especially as the new members of the Boards and Technical teams at the IASB are introduced to the mission of the IASB.