The interpretation of the verbal probability expressions used in the IFRS – The differences observed between Polish and British accounting professionals

Abstract

Research Question: Do Polish and British accounting professionals interpret verbal probability expressions (VPEs) differently when presented with identical excerpts from IFRS? Motivation: Our research has been motivated by the ongoing debate of consistent interpretation of VPEs. The major difficulty in the interpretation of these terms is the imperative for the accountants to express their individual subjective judgements. Previous research shows that these expressions may have low communication efficiency (Simon, 2002) as they give way to 'wide variations in interpretation' (Chesley, 1986: 196). The lack of consistency in the interpretation of VPEs may limit the usefulness of the financial statements prepared on their basis (Simon, 2002). Idea: We examine the interpretational differences between Poles and the British. We also survey whether the principle of prudence will impact the interpretation manner of the Polish and the British accounting professionals. Data: For the purpose of our study we distributed a questionnaire. 332 questionnaires from Poland and 75 questionnaires from the UK included answers that were subject to the analysis. Tools: We asked a sample of professional accountants from Poland and the UK to interpret the "in context" VPEs used in IFRS establishing the threshold for recognition of various accounting elements. Findings: Our results show that there are differences in the manner the Poles and the British interpret VPEs. Additionally, we indicate that the Polish accountants' attachment to the prudence principle affects their manner of interpretation. However, we were not able to state whether this

Arithmetic computation with probability words and numbers

“…In these and other areas (e.g., Morgan, 1998), experts typically assess and communicate probabilities with words such as "likely" rather than numeric quantifiers such as "75% chance." This is true even in stereotypically quantitative professions such as accounting (Kolesnik et al, 2019) and is consistent with the preference of communication senders who tend to favor the use of verbal over numeric probabilities Reproduced with the permission of the Minister of Department of National Defence. Juanchich & Sirota, 2020;Olson & Budescu, 1997;Wallsten, Budescu, Zwick, & Kemp, 1993).…”

Communicating uncertainty in national security intelligence: Expert and nonexpert interpretations of and preferences for verbal and numeric formats

“…Experts routinely make probabilistic judgments under conditions of uncertainty to aid decision-making. For instance, climate scientists predict the effects of global climate change (Budescu et al, 2009); epidemiologists project the public health impacts of COVID-19 (Ioannidis et al, 2020); Even in highly quantitative fields such as accounting (Koleśnik et al, 2019) and meteorology (Lenhardt et al, 2020), experts often convey probabilistic judgments using words (e.g., likely) instead of numeric quantifiers (e.g., 75% chance). This tendency reflects a well-documented preference pattern known as the communication mode preference paradox: in general, people prefer to send verbal probabilities, and especially when the uncertainty they are characterizing is internal or epistemic (Juanchich & Sirota, 2020), but they prefer to receive numeric probabilities (Brun & Teigen, 1988;Erev & Cohen, 1990;Wallsten et al, 1993; for a review of recent developments on this topic, see Dhami & Mandel, 2022).…”

Communicating uncertainty using words and numbers

“…The interindividual variability in numeric interpretations of verbal probabilities [51] continues to be observed in English-speaking samples, and is evident among experts/professionals [25][26][27]30,34,35,52,53] as well as lay people (e.g., [17,19,20,24,32,36,[44][45][46][47]54,55]). Such variability is also documented among non-native English-speakers, where probability terms may or may not be translated [7,28,35,49,56,57]. These non-native language users have reduced numeric discriminability of terms that lie above and below the mid-point of the probability scale [7,49,57].…”

“…Whereas some ask participants to select or respond to probability terms from a predefined list (e.g., [23][24][25][26][27][28]), others capture free-text responses or uncertainty language use in natural settings (e.g., [29][30][31][32][33]). Several recent studies have examined terms in existing official uncertainty communication policies (e.g., [34][35][36]). However, many examine one or a few probability terms (e.g., [12,17,19,37,38]).…”