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Journal cover: Journal of Applied Accounting Research

Journal of Applied Accounting Research

ISSN: 0967-5426

Online from: 1999

Subject Area: Accounting and Finance

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Comparison of two methods for measuring compliance with IFRS mandatory disclosure requirements


Document Information:
Title:Comparison of two methods for measuring compliance with IFRS mandatory disclosure requirements
Author(s):Ioannis Tsalavoutas, (Department of Accounting and Finance, The University of Stirling, Stirling, UK), Lisa Evans, (Department of Accounting and Finance, The University of Stirling, Stirling, UK), Mike Smith, (Company Reporting Ltd, Edinburgh, UK)
Citation:Ioannis Tsalavoutas, Lisa Evans, Mike Smith, (2010) "Comparison of two methods for measuring compliance with IFRS mandatory disclosure requirements", Journal of Applied Accounting Research, Vol. 11 Iss: 3, pp.213 - 228
Keywords:Accounting standards, Disclosure, Financial reporting
Article type:Research paper
DOI:10.1108/09675421011088143 (Permanent URL)
Publisher:Emerald Group Publishing Limited
Abstract:

Purpose – The purpose of this research is to highlight the differences, and implications of any differences, between two approaches to measuring compliance with International Financial Reporting Standards (IFRS) mandatory disclosure requirements: the commonly used “dichotomous” approach; and the alternative, but rarely used, partial compliance unweighted approach. The former gives equal weight to the individual items required to be disclosed by all standards. The latter assumes that each standard is of equal importance and consequently gives equal weight to each standard.

Design/methodology/approach – The paper employs both methods on a sample of companies. We then compare the results deriving from the application of the two methods and statistically test their differences.

Findings – It is found that the two methods produce significantly different overall and relative (i.e. ranking order) compliance scores.

Practical implications – This paper should alert researchers to the implications of using either method. Additionally, it highlights the need for academics and/or practitioners to be cautious when interpreting the findings of prior studies on compliance with IFRS mandatory disclosure requirements. Since the two methods produce significantly different compliance scores, findings regarding the variables associated with compliance may differ, depending on the disclosure index method followed. The paper suggests that simultaneous application of both methods would result in more robust findings in future research.

Originality/value – This is the first study to compare the results produced by applying both methods and statistically test their differences. The research methods explored are in particular relevant for policy-oriented, international accounting research.



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