Study finds cultural background and translation influence the interpretation of IFRSs

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24 Nov 2015

The Australian Accounting Standards Board (AASB) and the Korea Accounting Standards Board (KASB) will report on a joint research project on IFRS implementation at the seventh annual meeting of the AOSSG and the next ASAF meeting in December. The project explores how cultural background and translation affect the interpretation of the terms that are used in IFRS.

The project uses the different terms of 'likelihood' that are used in IFRSs to trace the influences of cultural background and translation. The key findings arrived at so far are:

  • There are differences in interpretation of the terms between Australian and Korean accounting professionals when used in context and not in context.
  • Some terms are interpreted differently in different contexts.
  • Some terms some terms are not interpreted differently from each other.
  • Some terms are interpreted differently in different languages by Korean accounting professionals indicating that there may be a translation issue that should be addressed.
  • Some terms cannot even be translated into Korean or are translated into a single Korean term even when the IASB uses different terms.

Based on these findings, the two standard-setters make several recommendations that would apply to the IASB as follows:

  • The IASB should give considerable attention to how terms might be interpreted and translated in different jurisdictions when developing a standard.
  • The IASB should narrow the number of different terms used in standards and consideration should be given to establishing a set of terms that can only be departed from in exceptional cases.
  • If a set of ‘accepted’ terms were to be developed, the process should include consulting with specialist linguists who have familiarity with IFRS.
  • Standard-setting outreach and consultative processes should explicitly seek to obtain input on translation and interpretation issues in different jurisdictions.

As reported earlier, translation issues are a recurring motif in connection with the use of IFRSs around the word. In 2011, the Institute of Chartered Accountants of Scotland (ICAS) published a study that arrived at the conclusion that translation is not impossible, but exact equivalence is - which is something every standard-setter and regulator needs to be aware of.

Please click to access the AASB/KASB study (which is still a work in progress) as submitted for the ASAF meeting on the IASB website.

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