Deloitte’s iasplus.com website reports on an upcoming a joint research study conducted by the Austrailian Accounting Standards Board (“AASB”) and the Korean Accounting Standards Board (“KASB”) that suggests that differences in jurisdictional implementation of IFRS might be caused by interpretation differences in the language used in translated IFRS standards.
According to the iasplus summary, the joint “project uses the different terms of ‘likelihood’ that are used in IFRSs” to identify the relationship between cultural background and translation.
In a working paper draft of the study, its authors explain that “terms of liklihood” refers “to expressions often used in IFRS to denote levels of probability in prescribing recognition, measurement or disclosure of events and transactions in financial reports .” The expressions referred to in the study include terminology such as “remote” and”virtually certain,” among others.
Some findings discussed in the, as yet unreleased study, include:
- Australian and Korean accountants interpret the reference terms differently when used in context and not in context.
- Korean accountants interpret some terms differently in different languages.
- For the Korean language some IFRS terms cannot be translated or are translated into a specific Korean term, even when the IASB uses different terms.
In the study, the AASB and the KASB offer the IASB some recommendations for addressing these identified translation/interpretation challenges.
Other studies identified similar challenges related to translating IFRS for implementation globally. For example, a 2011 Institute of Chartered Accountants of Scotland study discussed such challenges and offered recommendations for limiting the diverse implementation differences caused by translation/interpretation differences.
Certainly, the IASB is aware of the translation challenges it faces. On their website the IFRS Foundation, the governing body of the IASB, makes its translation policy and formal translation process available for interested parties.
The introduction of their translation policies states:
“The IFRS Foundation recognises the central role of the provision of IFRS and supporting material in other languages. It therefore seeks the close co-operation of jurisdictions and organisations interested in producing translations of IFRS and related material. .. . Countries adopting or permitting the use of IFRS will only be able to benefit from the comparability and transparency that the use of IFRS provides if the standards are rendered accurately and completely into each language.”
In its translation process, the IFRS Foundation establishes and retains tight controls over the translation process. Their policies and procedures include a formal process for approving translation of its publications and a formal review process that must be completed before a translation is approved.
Of course, as is pointed out by the AASB/KASB study, accountants across jurisdictions and, even within a single jurisdiction, sometimes interpret the approved translated accounting standards differently.