Does a Principle Based Accounting Standard Improve the Disclosure Level? Evidence from the Adoption of IAS 19R

Abstract

This research investigates whether a principle based accounting standard improves the disclosure level, and uses the latest pension accounting standard- IAS 19R as the subject. More specifically, this essay examines whether IAS 19R affects the average disclosure level of the actuarial assumptions (DAS). 200 companies are chosen from four European countries (i.e. Germany, Sweden, France, and Italy) as the sample, and the data is hand-collected by reviewing the annual reports of each firm when the firm first adopted the IAS 19R and one year before. The results indicate that the IAS19R significantly improves the average DAS, whilst also reducing the comparability of the disclosed pension information. Moreover, companies with more foreign ownership have a higher DAS after adopting the IAS 19R. This study advances the studies of principle based accounting standards. It provides current and comprehensive empirical research of the IAS 19R, with an in-depth examination of textual, quantitative and sensitive disclosure to get a clearer understanding of the DAS under IAS 19R. This essay may also contribute to a better understanding of the IAS 19R and provide useful feedback to the IASB concerning the implications of the IAS 19R.