Disclosure Patterns in a Principle-Based Accounting Framework

• In Event: Concurrent Session 2.2: Disclosure Practices

Abstract

The absence of guidance in a principle-based accounting framework causes diversity in disclosure practices at IFRS introduction. While some advocate that after initial application disclosures will become more comparable over time due to learning, others argue that initial disclosure differences will remain due to the absence of specific rules and guidance in the standards.
Using hand-collected data on 21 valuation-related disclosure items of real estate firms over the period 2005 to 2010, we find that firms with low initial disclosures levels catch up on firms with high initial disclosure levels although initial differences in disclosure levels do not totally disappear. Furthermore, our results suggest that in a principle-based accounting framework an exogenous shock, such as the financial crisis, accelerates the process to more comparable disclosure practices. These results are of interest in the debate of shifting from rule- to more principle-based accounting standards.

Authors

• Skrålan Vergauwe, Lancaster University

• Ann Gaeremynck, KU Leuven