International Accounting Standards Board Research Articles

Integrated reporting business models and the role of presentation format: insight from an eye tracking study

Purpose The integrated reporting framework affords considerable discretion over the form and content of business model disclosures, but a diagrammatic representation is favoured. In practice, most firms choose to use an infographic. This study aims to determine whether an infographic is a more effective and efficient form of communication than narrative-only information. Additionally, the mediating role of psychophysiological arousal is examined. Design/methodology/approach Using an explorative experimental design, this study uses eye-tracking technology to examine how users interact with different presentation formats for business model disclosures and how this affects the effectiveness and efficiency of the disclosures. Using pupillometry, the impacts of presentation format on arousal are also examined, in addition to the mediating effect of arousal on recall and comprehension. Findings Infographic presentation led to a substantial decrease in reading time coupled with moderately lower recall relative to narrative-only presentation. However, no significant difference in comprehension was observed. Additionally, infographic presentation was associated with higher arousal, but arousal was not found to mediate the relationship between presentation format and communicative effectiveness. Originality/value The study assists reporters and standard-setters, such as the International Accounting Standards Board and International Sustainability Standards Board, by providing qualified support for the diagrammatic representations of business models as an efficient means of communicating complex financial and non-financial information and highlighting future research opportunities.

The evolution of fair value measurement

While measurement is a fundamental process to the preparation of financial statements, the conceptual frameworks established by both the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) offer limited guidance on selecting an appropriate measurement basis for assets and liabilities. This paper examines the historical progression of fair value measurement, a measurement basis that is at the centre of some of the most polarising views. We believe that understanding the evolution of fair value measurement is pivotal for aiding academics and practitioners in shaping the future trajectory of measurement. This is particularly crucial given the technological advances in corporate reporting and the need to enhance the connectivity between financial and non-financial reporting.

REPRESENTATION AND DEMOCRATIC PROCESS IN THE PRODUCTION OF ACCOUNTING STANDARDS BY THE IASB: A DISCURSIVE ANALYSIS

In a globalized world where representation and democratic values ​​are extolled, especially in the West, institutions that do not profess and practice them are criticized for lacking legitimacy. The International Accounting Standards Board (IASB), as a social institution, influences and is influenced by the social environment. However, criticism has been leveled at the institution regarding its legitimacy, especially because it is a private regulatory entity. Such criticism calls into question values ​​such as independence, public interest, due process, accountability, diversity, and representativeness. The objective of this paper is to analyze, based on some documents published by the IASB, the values ​​that this institution professes, seeking to confer the perception of legitimacy before the public. The theoretical premise adopted is that of social constructivism and institutional accounting theory, which advocate that meanings and symbols are social constructions and that, therefore, institutions play an important role in the creation, maintenance, or modification of symbolic universes, as well as in their legitimacy. Discourse Analysis (DA) will be used as an instrument capable of revealing the values ​​advocated by the IASB. In the end, it is found that the IASB has professed values ​​such as representativeness, diversity, transparency, due process, public interest, independence, and accountability, seeking to legitimize itself before the public. In this sense, this article contributes to highlighting that the IASB's discourse is in tune with social values ​​dear to the Western world.

Determining factors to implementing IFRS for SMES: a study in International Accounting Standards Board countries

Determining factors to implementing IFRS for SMES: a study in International Accounting Standards Board countries

The Evolution Of International Financial Reporting Standards (IFRS) And Its Impact On Global Business Practices

The International Financial Reporting Standards (IFRS) have undergone significant evolution over the years, shaping the financial reporting on a global scale. The journey of IFRS began with the establishment of the International Accounting Standards Committee (IASC) in 1973, which laid the foundation for international accounting harmonization. Over time, the IASC transformed into the International Accounting Standards Board (IASB), which took on the responsibility of developing and issuing IFRS. The adoption of IFRS has become increasingly widespread, with many countries around the world either adopting the standards outright or converging their national standards with IFRS. One of the primary objectives of IFRS is to enhance the comparability, transparency, and reliability of financial reporting across borders. By providing a common set of accounting principles, IFRS facilitates better communication and understanding among stakeholders, including investors, creditors, regulators and other users of financial information. This standardization promotes efficiency in capital markets and encourages cross-border or cross-nation investment and business activities. IFRS is characterized by its principles-based approach, which emphasizes substance over form and allows for greater flexibility in financial reporting. Unlike rules-based standards, which prescribe specific treatments for various transactions, principles-based standards provide a framework for judgment, allowing preparers to alter their financial statements to reflect the economic reality of their transactions. The impact of IFRS extends beyond financial reporting to areas such as taxation, auditing, and regulatory compliance. While the adoption of IFRS has brought many benefits, it has also presented challenges for companies and regulators alike. The evolution of IFRS has had a profound impact on global business practices, promoting greater transparency, comparability, and efficiency in financial reporting. Through an examination of the evolution of IFRS, this research contributes to a deeper understanding of its profound influence on global business practices

Exploring gender stereotypes in financial reporting: An aspect-level sentiment analysis using big data and deep learning

This study delves into the intricate interplay between gender stereotypes and financial reporting through an aspect-level sentiment analysis approach. Leveraging Big Data comprising 129,251 human face images extracted from 2085 financial reports in Chile, and employing Deep Learning techniques, we uncover the underlying factors influencing the representation of women in financial reports. Our findings reveal that gender stereotypes, combined with external economic factors, significantly shape the portrayal of women in financial reports, overshadowing intentional efforts by companies to influence stakeholder perceptions of financial performance. Notably, economic expansion periods correlate with a decline in women's representation, while economic instability amplifies their portrayal. Furthermore, the financial inclusion of women positively correlates with their presence in financial report images. Our results underscore a bias in image selection within financial reports, diverging from the neutrality principles advocated by the International Accounting Standards Board (IASB). This pioneering study, combining Big Data and Deep Learning, contributes to gender stereotype literature, financial report soft information research, and business impression management research.

The Accounting Treatment of Cryptocurrencies: The Perspective of Current Accounting Standards

Cryptocurrencies are digital currencies void of any support from regulatory body that is currently in vogue as a medium of exchange and an investment security. This paper examines the accounting treatment for cryptocurrency from the perspective of IFRS and AAOIFI accounting standards and propose actions to standard setters on the best way to treat the Crypto transactions in accounting reports. A proper accounting treatment will allow for a fair reporting of crypto related transactions and facilitate users of financial statements to make objective assessment of this new invention. A content analysis was conducted to review all major accounting standards issued by accounting standards setting bodies for possible accounting treatment for cryptocurrencies. To better understand the issue in practice, an analysis of accounting treatment of cryptocurrencies by 2 companies also was conducted. This study found that there is no suitable accounting standard that could objectively be applied for cryptocurrencies. For example, from the perspective of the current accounting standards, cryptocurrencies match the definition of inventory if it is used as a commodity for broker-trader and intangible asset for others respectively. It is suggested that there an urgent need for the International Accounting Standards Board (IASB) to comprehensively develop accounting standard for cryptocurrency, specifically to develop a specific category for this type of assets to allow a standard treatment for cryptocurrency and fill the gap in the IFRS.

IPO conditional conservatism, underpricing and post-issue stock market survival

PurposeWe examine the association between conditional conservatism in initial public offering (IPO) underpricing and post-issue stock market survival in the U.S.Design/methodology/approachWe adopt an archival approach by collecting data for 1,761 U.S. IPO issuers for the period 1990–2017. Regression analyses are conducted to evaluate the association between conditional conservatism in initial public offerings with underpricing and post-issue stock market survival. We identify firms that went public in the period 1990–2012. These firms are then followed for five years after the IPO to assess their stock market survival.FindingsWe find that pre-issue conditional conservatism is significantly associated with less IPO underpricing. We also detect that IPO firms with higher levels of conditional conservative reporting are more likely to survive in the post-IPO stock market in the three-, four-, and five-year periods after the IPO. Our main findings are robust after controlling for other factors in our models, such as IPO cycles, venture capitalists, research and development investment, and pre-IPO accounting performance.Originality/valueWe extend research by demonstrating that conditional conservative reporting practices help firms reduce their indirect costs of raising their initial public capital. Additionally, our research introduces new evidence on the association between pre-IPO conditional conservatism and after-issue stock market survival. Our findings empirically support the International Accounting Standards Board’s (IASB) decision to reintroduce the concept of prudence into the conceptual framework, by showing how conservative reporting can reduce information asymmetry in IPO firms.

THE IMPACT OF APPLYING INTERNATIONAL STANDARD NINE ON THE QUALITY OF ACCOUNTING INFORMATION

There is an increasing need to find professional institutions that sponsor the work of companies in the financial and accounting fields due to the changes and developments taking place in the economic environments. Hence, the International Accounting Standards Board - IASB, which includes many other sub-boards like the Financial Accounting Standards Board - FASB, has issued many scientific publications in financial and accounting fields. Furthermore, the International Accounting Standards Board, through its sub-boards, including the Financial Accounting Standards Board, has formulated several International Financial Reporting Standards ( IFRS ) to improve the quality of financial reporting and the transparency of the information it contains in a globally applicable and accepted manner. This information would reflect the current situation of economic institutions in terms of performance and financial position in response to changes in economic environments, and to meet the needs of This framework will be applied consistently across transactions, industries, and capital markets to improve the comparability of financial data between economic institutions operating in the same sector globally and within a comprehensive, unified, and stable framework.

Classification and presentation of equity in IFRS financial statements

Subject. This article examines the methodological basis for the classification and presentation of an organization's equity in financial statements prepared in accordance with IFRS. Objectives. The article aims to substantiate the approach to the classification and presentation of information on the equity of an organization, ensuring its relevance and faithfulness. Methods. For the study, we used a logical analysis. Results. Based on the analysis, the article confirms the prospects for the combined use of the two features of the classification of capital items proposed in the Exposure Draft IASB/ED/2023/5 by the International Accounting Standards Board (IASB). Conclusions. As innovative financial instruments emerge, new problems will arise with the classification of financial instruments that have characteristics of both capital and liabilities. In this regard, it is necessary to continue research in the direction of the evolution of approaches to the classification of capital.

Size matters: When do minor discontinued operations become major?

Purpose: This paper explores the thresholds that firms apply when classifying discontinued operations in accordance with the requirement in IFRS 5 Non-current Assets Held for Sale and Discontinued Operations (IFRS 5). Motivation: The IFRS 5 requirement, that only major operations may be classified as discontinued operations, is vague and open to interpretation. Existing literature is largely silent on what firms deem as major, whether diversity exists in practice, and whether the classification decision can be linked to earnings management. Methodology: The sample includes financial statement data of listed South African firms for the financial years ending 2016 to 2022. Univariate analyses and graphical presentations are used to address the research questions. Main findings: Diversity exists as to what firms deem as major discontinued operations. A non-negligible portion of firms classify relatively minor operations as discontinued. Evidence shows that firms’ classification decision is related to whether the discontinued operations incurred losses and whether a firm is audited by a Big Four auditor. No evidence of earnings management through meeting or beating performance benchmarks is found. Practical implications: The paper contributes to a long-standing request to the International Accounting Standards Board to provide guidance on the classification of discontinued operations. The observed thresholds can be used in the decision-making process of practitioners and tertiary educators when assessing whether an operation meets the size requirement of IFRS 5. Contribution: The paper contributes to the limited literature on the topic and relies on hand-collected data that could not be found on commonly used databases.

Rethinking accounting objectives— based on Conceptual Framework for Financial Reporting 2018

This paper begins by emphasizing the pivotal significance of studying accounting objectives, considering them as the logical starting point for the structure of accounting theory. It provides a broad overview of decades of research on the positioning of accounting objectives and conducts a detailed analysis of the accounting objectives expounded in the recent 2018 release of the "Conceptual Framework for Financial Reporting" by the International Accounting Standards Board. Through analysis, it uncovers contradictions between the characteristics of financial reporting outlined in this conceptual framework and the established accounting objectives. Moreover, it contends that the identified objectives are, in reality, elusive, presenting significant challenges to achieving the goals set by the IASB. Furthermore, it delves into how these accounting objectives prioritize the interests of investors and creditors, compelling accountants to provide valuation services for securities investors and distorting the essence of accounting. This prioritization, along with the resulting ranking, is argued to be incongruent with the realities of the Chinese context, adding complexity to the issues associated with accounting objectives.

“Loss distribution”: the accounting treatment, corporate and tax ramifications, in Brazil

This study describes the accounting treatment and underlying basis of the allocation of losses to partners, not of dividends, but within intra-corporate transactions, according to the IFRS. The study takes into account the fact that there is not always a specific legal requirement for implementation in other countries, as is the case in Brazil, although in the legal literature such treatment is acknowledged internationally. The assumption of accounting loss to a partner's account was originally introduced in the Brazilian Income Tax legislation of 1977. That accounting technique was determined by the Federal Revenue Service. Although Congress was responsible in this period for the accounting discipline, specifically for Corporation Law, they remained silent in this regard. Consequently, the lack of specific legal provisions for corporate accounting standards may have led, in oblique ways, to a small exploration of this topic and its little practical use in the real world. Considering such factors, this research investigates the accounting treatment options currently applicable to this type of transaction in Brazil, under the influence of common law, and various tax and corporate ramifications stemming from its adoption; this paper also aims to publicize possible grounds for propagating the practice, based on the guidelines laid down by the International Accounting Standards Board (IASB). Applying the qualitative research method, it was possible to conclude that the assumption of loss to the partner account is equivalent to a capital contribution, in the form of contributions made by supporting shareholders. For this reason, shareholders record it as investments and the investee company does not record any revenue, although there is an effective equity increase. Due to being a non-onerous act, given the absence of issuance of shares, there is no change in existing equity interests, nor taxation on the agents involved. The allocation of losses to partners is practical in its contractual form, dispensing with the need for share capital to be increased by the partners and later reduced, commonly referred to in European Law as coup d’accordéon and operação harmónio, which simplifies the transaction and corporate records. This work considers the accounting treatment according to the IFRS, while at all times taking into account the legal framework applied to the transaction, locally and according to international corporate literature, with a view to encourage more extensive use and its resultant benefits.

Emerging Chinese status in international accounting standard setting: A social network analysis of the International Accounting Standards Board

ABSTRACT This study employs a network analysis with centrality measures to trace China’s evolving position within the International Financial Reporting Standards (IFRS) governance network. The analysis spans from 2001 to 2021, revealing the shifts in China’s position from a marginal to a more central one in the IFRS governance network. The benefit of information and control across the network empowers China to emerge as an important force influencing the operations of the International Accounting Standards Board (IASB) and IFRS development. The findings contribute to our understanding of the political dynamics in international accounting regulations. Insights gleaned from China’s experience offer implications for other jurisdictional constituents aspiring to amplify their influence in IFRS development. While acknowledging certain limitations in the study, this research concludes by advocating for a deeper exploration of China’s representation role in the IASB’s decision-making process.

Major Changes in IFRS and Comparison with US GAAP

The evolution of International Financial Reporting Standards (IFRS) reflects the needs of the global business environment and the pursuit of higher quality financial reporting. This paper discusses and explores major changes implemented in IFRS, specifically in the areas of revenue recognition, lease accounting, and the treatment of intangible assets. The shortcomings of the past application of IFRS standards in these aspects are presented in this paper, as well as changes and benefits after IFRS made corresponding modifications. By reviewing materials and literature, the study conducts a comparison between IFRS and the United States Generally Accepted Accounting Principles (US GAAP). These two major accounting frameworks have adopted unique methods and standards. Still, both the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) work hard together to realize international harmonization. The outcomes of this research make it clear that ongoing refinements to IFRS have significantly improved the clarity, consistency, and comparability in how financial activities are reported. Such changes have been pivotal in diminishing uncertainties and bolstering the trustworthiness of financial disclosures. Being influenced by the continuous developments in IFRS, greater transparency and accountability in financial reporting will be achieved. This has made a great contribution to helping investors in sound economic decision-making and enhancing investor confidence.

International Financial Reporting Standards Convergence Process for Small and Medium-Sized Entities

The "International Financial Reporting Standards (IFRS) Convergence Process for Small and Medium-Sized Entities (SMEs)" seeks to address the unique challenges and requirements faced by smaller businesses in adhering to international accounting and reporting standards. This initiative recognizes that SMEs operate in diverse economic environments and have distinct financial reporting needs compared to larger enterprises. The primary purpose of this convergence process is to enhance the relevance, accessibility, and practicality of IFRS for SMEs, fostering consistency in financial reporting practices across global markets.A project to create accounting standards appropriate for small and medium-sized businesses (SMEs) is being worked on by the International Accounting Standards Board. This abstract provides an overview of the convergence process involving International Financial Reporting Standards (IFRS) for Small and Medium Sized Entities (SMEs). With the global landscape of financial reporting constantly evolving, the integration of IFRS tailored specifically for SMEs marks a pivotal transition towards harmonizing financial reporting practices. This paper examines the essential elements and implications of this convergence, addressing the challenges and benefits faced by SMEs as they align with these international standards. The analysis delves into the driving factors behind the convergence, including the necessity for a unified and transparent financial reporting framework, aiming to facilitate comparability and accessibility of financial information across borders. Furthermore, the abstract discusses the potential impact on SMEs' financial reporting quality, decision-making processes, and access to capital. Through a comprehensive review of the convergence process, this abstract seeks to contribute to the understanding of the significance and implications of adopting IFRS for SMEs, thereby providing valuable insights for practitioners, regulators, and stakeholders in the financial reporting ecosystem.

Labelling in financial reporting: An examination of “other comprehensive income” and non‐professional investors' judgements

AbstractOther comprehensive income (OCI) is often confusing for financial statement users and the International Accounting Standards Board has proposed new labelling to improve its presentation. Using an experimental method, we find that OCI labelling influences non‐professional investors' evaluation and judgements on financial performance. Non‐professional investors place greater weight on OCI information presented with explicit labels when assessing both the current and future performance of a company. Our results indicate that improving the presentation of OCI information enhances their perceived relevance in investors' decision‐making. The results have practical implications for standard setters and financial statement users.

Interpreting IFRS: The Evolving Role of Agenda Decisions

This study examines the evolution of the interpretative support provided by the IFRS Interpretations Committee (IC), the interpretative body of the International Accounting Standards Board (IASB), over the period 2002–2019. The study focuses on its most frequent output, agenda decisions (ADs), which can provide guidance that practice has long considered relevant and has been explicitly considered authoritative since 2020. We investigate whether the IC has provided additional guidance and changed the formulation of ADs over time in response to constituents’ criticism from the perspective of legitimacy theory. We find that the IC has progressively added more explanatory material and formulated ADs in a more complete and nuanced manner so as to gain consequential legitimacy by substantially addressing the constituents’ interpretation demands. This evolution points to the growing role of ADs, which strike a balance between difficult to reconcile objectives. Providing more substantial support to constituents’ submissions can be seen as a balancing act between a more explicit shift from principles to rules, and leaving room for local interpretations that could threaten the consistent application of International Financial Reporting Standards (IFRS). In shedding light on the IC's substantial response to the challenges posed by conflicting pressures and objectives, we add to the standard‐setting literature by providing evidence‐based insights into under‐researched areas of IFRS interpretation. We also respond to calls for more policy‐oriented research and offer two proposals to enhance the clarity of ADs in the light of their evolving content and increasing relevance.

Measurement Claim Reserving Insurance Contract in Accordance with IFRS 17 using Stochastic State Space Model

International Financial Reporting Standard 17 (IFRS 17) is a global accounting standard developed by the International Accounting Standards Board (IASB). It guides the accounting treatment of insurance contracts in financial statements. In IFRS 17, claim reserving is vital for measuring insurance contracts and determining the Contractual Service Margin (CSM). The claim reserving process involves estimating expected claim payouts over the contract’s duration. These estimates are crucial for calculating the liability for incurred claims and determining the CSM, representing unearned profit. Claim data is treated as ordered data by sorting the run-off triangle row-wise, resulting univariate time series with missing values. The state space model provides a framework for modeling time series, assuming system development over time. By taking the log of claim data so that the data is normally distributed, the lognormal state space model, along with Kalman recursion algorithms, can be applied for Incurred but Not Reported (IBNR) projections. The lognormal state space model’s IBNR reserve estimate is more precise and sufficient to compensate loss than the chain ladder method. Furthermore, the performance of the lognormal state space model outperforms the chain ladder method by means of model validation using RMSE, MAE, RSE, and R2.

An Exploratory Study on The Presentation of Separate Financial Statements By Listed European Union Entities

The International Accounting Standard (IAS) 27 should be used in the presentation of separate financial statements (SFS) for entities listed on regulated markets within the European Union (EU) that adopt the standards issued by the International Accounting Standards Board (IASB) as adopted by EU (hereinafter simply referred as IAS). This exploratory study aims to assess the entities in the listed EU indices that presented SFS under IAS. The study sample consists of entities from the major indices of EU countries for which the use of IAS in SFS is required or permitted, and it used a quantitative methodology, resorting to the method of documentary research. The findings show that most entities presented SFS, regardless of whether they were required or permitted, which is also consistent across countries. These results may indicate that the entities consider SFS relevant to provide information to stakeholders. Despite being a topic of increasing interest, a significant gap regarding the matters related to SFS remains in the literature. Consequently, this study, although exploratory, contributes to literature on the presentation of SFS by listed entities in Europe.