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Category Research Report
Subject KASB Research Report No.39/ AASB Research Report No.2: Accounting Judgments on Terms of Likelihood in IFRS: Korea and Australia
Date 25 Jul 2016
File July_2016_(KASB-AASB)_Accounting_Judgments_on_Terms_of_Likelihood_in_IFRS_Korea_and_Australia.pdf

Hans Hoogervorst, Chairman of the  International Accounting Standards Board, said: 

“The IASB is committed to  improving the communication of financial information, and this requires our  standards to be clearly understood and consistently applied around the world.  The KASB-AASB research on how specific terms used in  IFRS Standards are translated and interpreted across languages provides  interesting food for thought. An earlier version of this paper led to a lively  discussion among accounting standard setters at the Accounting Standards  Advisory Forum, which advises the IASB. We welcome research and input from  national standard-setters.”


The rapid spread of IFRS around the globe in recent years is a remarkable achievement, considering that the primary goal of IFRS is to provide a single set of high-quality accounting standards that is expected to bring transparency, accountability and efficiency to financial markets around the world. However, having a common set of financial reporting rules such as IFRS across jurisdictions is a necessary, but not sufficient condition to ensure the global financial reporting comparability. To improve the quality and comparability of global financial reporting under IFRS, consistent application of IFRS across jurisdictions must be achieved. 

This report investigates one source of potential inconsistencies – the interpretation of terms of likelihood in IFRS, such as ‘probable’, ‘reasonably possible’ or ‘possible’, in Korea and Australia, where distinctive differences in cultures and languages exist. The research identified at least 35 terms of likelihood in IFRS which represent challenges in coming to consistent application of IFRS across jurisdictions and found that most terms examined in this research tend to be interpreted inconsistently. Accordingly, we would like to emphasize that it will be useful for the IASB to consider narrowing down the number of terms of likelihood used in IFRS by retaining expressions which adequately cover the entire probability range. This may also help mitigate potential difficulties in the translation process. Also, we would like to suggest that the IASB consider providing guidance in the interpretation of expressions which are associated with lower communication efficiency. 

We hope that this joint research report sets out meaningful implications to the IASB and other national standards setters; however, we acknowledge that the research has its limitations. Accordingly, we encourage further investigation into the use of language in IFRS as IFRS, which is critical to guide judgments made in practice. In addition, we believe that it is necessary to encourage collaborative work among national standard setters and regional bodies which may facilitate efficient use of limited resources to contribute to develop a single set of high-quality global accounting standards.

This report is authored by Dr. Youngmi Seo, Technical Manager at KASB, with contributory assistance from Angus Thomson, Director of Research at AASB and Dr. Eric Lee, Project Manager at AASB. We would like to express our deepest gratitude to all those who were involved in this research for their efforts and their passion in carrying out this research project. We also received comment letters on a draft of the report from the AcSB, ASCG, ARDF, ANC, DASB and HKICPA, and are grateful for their valuable input. We also thank participants of 2015 AOSSG Annual Meeting, 2015 December ASAF meeting, and 2016 IFASS Annual Meeting for their valuable comments and suggestions.

Lastly, please note that the views expressed in this research report are those of the author and do not necessarily represent the official views of the Korea Accounting Standards Board or Australian Accounting Standards Board. 

July 2016

Jee In Jang, Ph.D.                                                         Ms. Kris Peach
Chair and CEO                                                             Chair and CEO
Korea Accounting Institute                                         Australian Accounting Standards Board
Korea Accounting Standards Board