Impaired translations: IFRS from English and annual reports into English

Abstract

Purpose The purpose of this paper is to examine translation in the context of International Financial Reporting Standards (IFRS) by taking the example of the English term “impairment” in IAS 36, and following it into 19 translations. The paper then examines the terms used for impairment in English translations of annual reports provided by firms. Consideration is given to the best approach for translating regulations and whether that is also suitable for the translation of annual reports. Design/methodology/approach The two empirical parts of the paper involve: first, identifying the terms for impairment used in 19 official translations of IAS 36, and second, examining English-language translations of reports provided by 393 listed firms from 11 major countries. Findings Nearly all the terms used for “impairment” in translations of IAS 36 do not convey the message of damage to assets. In annual reports translated into English, many terms are misleading in that they do not mention impairment, peaking at 39 per cent in German and Italian reports in one year. Research limitations/implications Researchers should note that the information related to impairment in international databases is likely to contain errors, and the authors recommend that data should be hand-collected and then carefully checked by experts. The authors make suggestions for further research. Practical implications Translators of regulations should aim to convey the messages of the source documents, but translators of annual reports should not look only at the reports but also consult the terminology in the original regulations. The authors also suggest implications for regulators and analysts. Originality/value The paper innovates by separately considering regulations and annual reports. The authors examine a key accounting term systematically into a wide range of official translations. The core section of the paper is a new field of research: an empirical study of the translations of firms’ financial statements.

Language and translation in accounting: a scandal of silence and displacement?

“…Alexander et al (2018) question the possibilities of accounting harmonization, and call for more in-depth exploration of the interpretation and operationalization of concepts such as substance over forms, or true and fair view, in different language settings. Related to this, Evans (2018b) suggests that there is a need to further investigate the impact of ambiguity in accounting language on accounting judgment and linguistic hedging, and Nobes and Stadler (2018) make recommendations for the definition and translation of terms in IFRS, and also draw attention to the cause of common errors in the translation of annual reports. They point out that the systematic translation problems may mean that the data supplied by databases such as Worldscope are flawed or incomplete.…”

“…Apart from their wider conceptual merits, three papers in this AAAJ issue have particular relevance for policy and practicethe papers by Alexander et al (2018), Nobes and Stadler (2018), Locke et al (2018). While Alexander et al (2018) are concerned with the philosophical underpinnings of meaning and interpretation, their detailed examination of the implementation and interpretation of the "substance over form" concept in seven national settings is undoubtedly useful for legislators, standard setters and regulators.…”

“…Both Alexander et al's (2018) and Nobes and Stadler's (2018) papers argue that part of the reason for continuing differences in interpretation is a lack of definitions provided in the European Union directives, and IFRS Foundation standards, respectively. This means, in the case of "substance over form" that translators (or those commissioning translations) had considerable flexibility to "craft [their] own definition, regulate the principle without official definition or use a supposed close concept taken from local roots.…”

“…A more critical assessment of the potential of XBRL to overcome translation problems is provided by Locke et al (2018). Drawing also on Searle (1989) and Searle and Vanderveken (1985), as well as Austin (1961) and Locke et al (2018), explore, like Nobes and Stadler (2018), two sites of translation: the translation of IFRS, and the production of corporate reports. IFRS and other pronouncements are first translated into "taxonomies that can be digitally tagged" (p. 1981), and corporate reports are translated from analogue to digital form.…”

Investigating international differences in financial reporting: Data problems and some proposed solutions

“…We give three examples here. First, when conducting empirical research on the amount of impairment, Nobes and Stadler (2018) discovered that many firms use misleading signifiers in the versions of their annual reports published in English. For example, many French and German firms refer to "depreciation" when they mean "impairment", and many German and Italian firms refer vaguely to "write-downs".…”