Title: The interpretation differences of verbal probability expressions in principles-based accounting standards: evidence from China

Authors: Fengchun Tang; Ling Yang

Addresses: School of Business, Virginia Commonwealth University, USA ' College of Business and Economics, Longwood University, 201 High Street, Farmville, VA 23909, USA

Abstract: This study examines whether verbal probability expressions (VPEs) in principles-based accounting standards are understood and interpreted consistently by Chinese accounting professionals and students. We gathered data from auditors working in Chinese public accounting firms, accounting professionals not employed by Chinese public accounting firms, and Chinese accounting students. The results indicate that Chinese auditors exhibit a high degree of consensus in their VPE interpretations. However, preparer and student interpretations tend to vary more and exhibit lower levels of consensus. In addition, there are evidences showing that small differences in the translation of VPEs can have a significant unintended impact on the interpretations of these expressions in accounting standards.

Keywords: verbal probability expressions; principles-based standards; International Financial Reporting Standards; IFRS; China; interpretation differences; accounting standards.

DOI: 10.1504/IJAAPE.2016.077893

International Journal of Accounting, Auditing and Performance Evaluation, 2016 Vol.12 No.3, pp.287 - 312

Received: 01 Oct 2014
Accepted: 27 Jul 2015

Published online: 21 Jul 2016 *

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