Contingency liabilities: The effect of three alternative reporting styles

Bruce Lagrange, Chantal Viger and Asokan Anandarajan

Research in Accounting Regulation, 2015, vol. 27, issue 2, 119-128

Abstract: The International Accounting Standards Board's (IASB) new international financial reporting standards (IFRS) relating to contingencies became effective on January 1, 2011, officially replacing the CICA's (Canadian Institute of Chartered Accountants) contingent liability accounting standards for publicly accountable enterprises. Although both sets of standards (IFRS and CICA) are based on fundamentally similar conceptual frameworks, they differ significantly in certain respects. This study examines the changes now required in contingency reporting and their implications for regulators. Rules for contingency reporting were previously dictated by Canadian GAAP (CGAAP), as formulated by the Canadian Institute of Chartered Accountants, but are now subject to the IASB's IAS 37. However, to enhance clarity and ease of understanding for financial statement users, the IASB has proposed a new version of contingent liability accounting standards under IFRS, titled exposure draft IAS 37. The message conveyed by the three different types of reporting is investigated, with findings that have implications for other similar rules adopted by IASB. Results indicate variations in four types of judgments by the Canadian loan officers in the experiment. Although their loan granting decisions were not influenced by the change to IASB's IAS 37, the officers charged significantly different interest premiums according to the type of financial statement received, i.e. based on former Canadian requirements, the original IAS 37 or the proposed IAS 37 exposure draft. Loan officers' judgments are therefore influenced by the way contingent liabilities are presented, a finding that has implications for regulators, mainly in view of the fact that the proposed IAS 37 reporting style could facilitate clarity and understanding of these liabilities.

Keywords: Contingent liabilities; IAS 37; exposure draft IAS 37; IFRS; International Accounting Standards Board (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1052045715000326
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:reacre:v:27:y:2015:i:2:p:119-128

DOI: 10.1016/j.racreg.2015.09.003

Access Statistics for this article

Research in Accounting Regulation is currently edited by G. Previts

More articles in Research in Accounting Regulation from Elsevier
Bibliographic data for series maintained by Catherine Liu ().