Confirmation bias in accounting judgments: the case for International Financial Reporting Standards for small and medium‐sized enterprises

Dinuja Perera, Parmod Chand and Rajni Mala

Accounting and Finance, 2020, vol. 60, issue 4, 4093-4119

Abstract: We conduct an experiment that investigates confirmation bias in the reporting judgments of accountants when applying International Financial Reporting Standards (IFRS) for small and medium‐sized enterprises (SMEs). The results indicate that accountants’ judgments are biased towards the recognition and measurement principles of full IFRS when applying IFRS for SMEs. The results also suggest that confirmation bias in judgments can be mitigated by increasing accountants’ awareness of justification requirements and by using appropriate decision aids. These results are likely to be of interest to the 70‐plus countries that have adopted the SME standard and countries that continue to contemplate its adoption.

Date: 2020
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