The Rocket Science: Reading Financial Accounting Standards

Irish Accounting and Finance Association
Publication Type:
Journal Article
The Irish Accounting Review, 2010, 17 (2), pp. 41 - 63
Issue Date:
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This paper identifies readability as a significant obstacle to the international harmonisation of financial accounting standards. In the study, the Flesch Reading Ease and the Flesch-Kincaid Grade Level tests are used to analyse the International Financial Reporting Standard on leases (using the Australian equivalent, AASB 117), the other international standards (using the remaining 46 AASB standards), and the US standard on leases, FAS 13. The results show the language of AASB 117 and FAS 13 exceeds the expected ability of many readers and represents an impediment to the interpretation of accounting standards. T-tests indicate that, on average, the Reading Ease and Grade Level scores of the other 46 AASB standards are significantly more demanding than even AASB 117. Consequently, the readability of the International Financial Reporting Standards ought to be comprehensively addressed by the International Accounting Standards Board to ensure the efficacy of efforts to harmonise accounting internationally.
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