Abstract
National standard setters and external accounting observers continue to express concerns over a principles-based developed IFRS taxonomy. Considering the anticipated but unexpected SEC decision on March 3rd 2017 to adopt the IFRS taxonomy for electronic filings for Foreign Private Issuers by 2018 and the announcement of ESMA on December 22nd 2016 to base electronic filings in Europe on the IFRS taxonomy by 2020 signal that national regulators, external accounting observers and international regulators have a dissent. This paper reflects the expressed concerns by national standard setters. Applying a scientific approach, a comprehensive literature review is performed. The research question is if the rules-based IFRS taxonomy implies a conceptual conflict with the principles-based IFRS. This paper concludes considering the academic literature although there is conceptual conflict between a principles-based accounting standard and the template-based taxonomy, from a normative perspective the IFRS taxonomy improves comparability and transparency supporting true and fair view. Our study also contributes to the principles-based vs. rule-based debate in the academic literature. The new aspect is the role of IT with structured electronic reporting, which requires detailed and specific requirements, for which rule-based accounting has advantages over principles-based accounting.
Highlights
According to comments released recently by national standard setters on the proposed enhanced due process for the development and the maintenance of the IFRS Taxonomy, principles-based accounting and the IFRS taxonomy are perceived as a conceptual conflict (IASB, 2016)
With the planned integration of the taxonomy development into the standard setting process national standard setter such the Swedish Financial Reporting Board express their concerns: “We fear that bringing XBRL into standard setting will be detrimental to the principles based approach, as regards the presentation of disclosures.”
EFRAG has expressed the view that the development of the IFRS taxonomy should not drive the IASB standard setting process, because it risks moving away from a principles-based approach, in particular in the area of disclosures. ”we reiterate our comments made with references to the Request for Views Trustees’ Review of structure and Effectiveness: Issues for the Review that the Taxonomy should not be integrated in the IASB standard setting process because we see the risk that this may take the IASB away from a principles-based approach when it develops accounting standards, in particular in the area of disclosures.”
Summary
According to comments released recently by national standard setters on the proposed enhanced due process for the development and the maintenance of the IFRS Taxonomy, principles-based accounting and the IFRS taxonomy are perceived as a conceptual conflict (IASB, 2016). EFRAG has expressed the view that the development of the IFRS taxonomy should not drive the IASB standard setting process, because it risks moving away from a principles-based approach, in particular in the area of disclosures. ”we reiterate our comments made with references to the Request for Views Trustees’ Review of structure and Effectiveness: Issues for the Review that the Taxonomy should not be integrated in the IASB standard setting process because we see the risk that this may take the IASB away from a principles-based approach when it develops accounting standards, in particular in the area of disclosures.”. Those benefits are integrated into a model about Financial Accounting
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