Readability of Notes to the Financial Statements and the Adoption of IFRS

Cheung, Esther; Lau, J.

doi:10.1111/auar.12087

Cited by 45 publications

(33 citation statements)

References 42 publications

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“…The results showed that the adoption of homogenous accounting standards does not necessarily result in similar implications, as cultural, social, and institutional factors influence this relationship. While in the Australian context Cheung and Lau (2016) observed an improvement in the readability level of the reports, Jang and Rho (2016) demonstrated that, compared with the Korean normative standard, IFRS adoption did not result in greater readability; however, it did moderate the relationship between factors such as firm age and ownership structure, reinforcing an improvement in readability level.…”

Section: Does Disclosing More Mean Users Are Morementioning

confidence: 93%

“…The Readability Problem The problem of readability has already been studied in the field of accounting and auditing. Recent studies have consolidated the evidence on its determinants (Seifzadeh et al, 2020), as well as observing its implications in relation to audit quality (Salehi et al, 2020), earnings quality (Luo et al, 2018), cost of capital (Bonsall & Miller, 2017), and the adoption of the International Financial Reporting Standards (IFRS) (Cheung & Lau, 2016).…”

Section: Does Disclosing More Mean Users Are Morementioning

confidence: 99%

“…On the other hand, the aforementioned authors revealed that greater readability can reduce the perception of risk, improving the probability of fundraising. Cheung and Lau (2016) and Jang and Rho (2016) sought to verify whether the readability of financial reports altered with IFRS adoption. The results showed that the adoption of homogenous accounting standards does not necessarily result in similar implications, as cultural, social, and institutional factors influence this relationship.…”

Section: Does Disclosing More Mean Users Are Morementioning

confidence: 99%

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Has it become more readable? Empirical evidence of key matters in independent audit reports,

Marques

Pereira

Aquino

et al. 2021

Rev. contab. finanç.

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The aim of this study was to analyze the effect of the adoption of Brazilian Accounting Standard - Auditing Technique 701 (NBC TA 701, in its Portuguese initialism) over the readability of audit reports. The study fills a gap in the literature by obtaining empirical evidence regarding the effect of NBC TA 701 on the readability and comprehensibility of audit reports. The study is important for verifying whether the disclosure of key audit matters (KAMs) improves the ease of reading and understanding audit reports after the adoption of NBC TA 701. Unlike in the previous literature, it was observed that the effect of KAMs has a non-linear, U-shaped relationship, which suggests additional benefits to readability based on a certain quantity of key matters reported. The data from a sample of 240 listed companies on the B3 S.A. -Brasil,Bolsa,Balcão (B3), in the period from 2013 to 2018, were assessed using content analysis, descriptive statistics, difference of means tests, and panel data correlation and regression analyses. The results showed that the adoption of NBC TA 701 significantly affected the Flesch readability index (FRI) of the independent audit reports. They also confirmed that the quantity of KAMs reported increases the FRI in a non-linear way, and that the types of key matters affect readability differently according to their complexity. The results provide evidence that the new audit report improves the level of readability in a non-linear way, thus contributing to the informational content of the audit report used by the various users for decision making.

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Section: Does Disclosing More Mean Users Are Morementioning

confidence: 93%

Section: Does Disclosing More Mean Users Are Morementioning

confidence: 99%

Section: Does Disclosing More Mean Users Are Morementioning

confidence: 99%

See 1 more Smart Citation

Has it become more readable? Empirical evidence of key matters in independent audit reports,

Marques

Pereira

Aquino

et al. 2021

Rev. contab. finanç.

View full text Add to dashboard Cite

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“…Overall length refers to the total number of words analyzed in a document and may be used as an impression management tactic (Cheung & Lau, ; Conway, O'Keefe, & Hrasky, ). One argument is that longer letters are used as a device to obscure negative news (Conway et al, ).…”

Section: Hypothesesmentioning

confidence: 99%

An Investigation of the Impact of Data Breach Severity on the Readability of Mandatory Data Breach Notification Letters: Evidence From U.S. Firms

Jackson

Vanteeva

Fearon

2019

Asso for Info Science & Tech

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The aim of this article is to investigate the impact of data breach severity on the readability of mandatory data breach notification letters. Using a content analysis approach to determine data breach severity attributes (measured by the total number of breached records, type of data accessed, the source of the data breach, and how the data were used), in conjunction with readability measures (reading complexity, numerical intensity, length of letter, word size, and unique words), 512 data breach incidents from 281 U.S. firms across the 2012-2015 period were examined. The results indicate that data breach severity has a positive impact on reading complexity, length of letter, word size, and unique words, and a negative impact on numerical terms. Interpreting the results collectively through the lens of impression management, it can be inferred that business managers may be attempting to obfuscate bad news associated with high data breach severity incidents by manipulating syntactical features of the data breach notification letters in a way that makes the message difficult for individuals to comprehend. The study contributes to the information studies and impression management behavior literatures by analyzing linguistic cues in notifications following a data breach incident.

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“…In other cases, companies report according to the Czech legislation. For example, the research conducted by Cheung and Lau (2016) has shown that financial reports are significantly lengthier, yet are more readable in the post-IFRS period (after adopting IFRS reporting in the company). Further, the length of disclosures in Summary of Significant Accounting Policies, Financial Instruments and Intangible Assets are significantly longer after the adoption of IFRS.…”

Section: Accounting Regulation On Intangibles In the Czech Republicmentioning

confidence: 99%

Financial reporting of intangible assets – evidence on information and communication companies in Czech Republic

Маликова

Brabec

Rozkovec

2018

Journal of International Studies

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Intangible assets are becoming an increasingly important part of companies' assets. However, their recognition and measurement in financial statements is often complicated and is subject to the requirements of a given accounting regulation. Therefore, the objective of this article is to find out the relationship between the size of a company and the disclosure of intangible assets. To do so, financial statements of companies operating in the field of information and communications published between the years 2005 and 2015 are anal.ysed. The established hypotheses are tested using the methods of descriptive statistics, the Chi-Square test of independence and the method of Spearman rank correlation. The results of this research confirm that larger companies publish their financial statements for a longer period than smaller ones. Subsequently, it was found that the structure of publishing companies, as well as companies disclosing intangible assets does not change over time. In addition, it has been concluded that larger companies disclose intangible assets more often than smaller ones. Finally, it was confirmed that the share of intangible assets to fixed assets is higher in larger companies.

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Readability of Notes to the Financial Statements and the Adoption of IFRS

Cited by 45 publications

References 42 publications

Has it become more readable? Empirical evidence of key matters in independent audit reports,

Has it become more readable? Empirical evidence of key matters in independent audit reports,

An Investigation of the Impact of Data Breach Severity on the Readability of Mandatory Data Breach Notification Letters: Evidence From U.S. Firms

Financial reporting of intangible assets – evidence on information and communication companies in Czech Republic

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