Readability of Notes to the Financial Statements and the Adoption of IFRS

Esther Cheung and James Lau

Australian Accounting Review, 2016, vol. 26, issue 2, 162-176

Abstract: This study examines the association between the readability of financial disclosures and IFRS adoption in Australia. Results show that the Notes (the Notes) to the Financial Statements are significantly lengthier, yet are more readable in the post‐IFRS period. Further, the disclosures in the Summary of Significant Accounting Policies, Financial Instruments and Intangible Assets drive the increased length of the Notes. This study examines the association between the readability of financial disclosures and the adoption of International Financial Reporting Standards (IFRS) in Australia by assessing: (1) the impact of the adoption of IFRS on the readability of Notes to the financial statements in the Australian context; and (2) the potential accounting policies that drive the increased length of the Notes to the financial statements post‐IFRS. Results show that financial reports are significantly lengthier, yet are more readable in the post‐IFRS period. Further, the length of disclosures in Summary of Significant Accounting Policies, Financial Instruments and Intangible Assets are significantly longer after the adoption of IFRS.

Date: 2016
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