Can Translation Make IFRS More Relevant? Understanding Accounting in a Multi-Lingual World

• In Event: 1.01. Financial Disclosure and Linguistic Analysis

Abstract

Can language translations of IFRS improve the value relevance of International Financial Reporting Standards (IFRS) in a multi-lingual world? To overcome the language barrier, the International Accounting Standards Board (IASB) publishes translations of IFRS, which have been shown to increase accounting quality. In this study, I begin to explore the role IFRS translations play in helping or hindering the other benefits associated with IFRS. Specifically, I analyze if if/how language barriers impede the value relevance of IFRS-compliant financial statements. Once documented, I then explore if the issuance of translations of IFRS by the IASB help to mitigate this language barrier. Focusing on translations, I also consider linguistic properties of the standards themselves, and try to predict which standards may be harder or easier to translate. Using these predictions, I then test the value relevance of specific financial statement items that tie to the identified standards to try and isolate the influence translations may have on value relevance.

Authors

• Emily Anne Shafron, Texas A&M University

• John Schomburger, Texas A&M University