The Rashomon Effect in Financial Reporting: Exploring Multi-Interpretation Phenomenon in the Case of Garuda Indonesia's Annual Financial Statements

Abstract

This study examines the phenomenon of multi-interpretation in financial reporting through the lens of the Rashomon effect, using the case of Garuda Indonesia's annual financial statements. Drawing inspiration from Akira Kurosawa's film, Rashomon, which portrays a single event from different characters’ perspectives, this research interviews four key stakeholders: auditors, academicians, regulators, and users. The findings reveal that, similar to the film, each stakeholder offers a distinct interpretation of the financial transactions between Garuda Indonesia and Mahata Aero Teknologi. The root cause of the issue lies in adopting principle-based accounting standards, which leads to differing interpretations and perceptions. The implications of this study highlight the need for continuous collaboration and coordination among regulators, auditors, academicians, and users to enhance accounting literacy and foster a deeper understanding of accounting principles. It is crucial to address the limitations posed by principle-based standards and explore the potential transition to rule-based standards to minimize the occurrence of multi-interpretation cases in financial reporting. This research provides valuable insights for stakeholders involved in financial reporting, aiding in identifying challenges and formulating effective strategies to promote transparency and accuracy in financial statements. Financial statements provide essential information about a company's financial performance and position. They are intended to assist many users in making informed economic decisions. However, a significant challenge arises when interpreting financial statements accurately and consistently. The interpretation of financial statements is prone to multiple perspectives, leading to diverse and sometimes contradictory understandings of the same information.