Complex information and accounting standards: Evidence from UK narrative reporting

Ekaete Efretuei, Abel Usoro and Christina Koutra

South African Journal of Accounting Research, 2022, vol. 36, issue 3, 171-194

Abstract: The application of International Financial Reporting Standards (IFRS) has been introduced in many countries to enhance efficiencies in financial markets and improve communication in financial reporting. However, extant studies have suggested that the introduction of IFRS has increased narrative complexity, owing to the demand for more reporting. Considering that accounting complexity can be either informative (enhancing understanding) or non-informative, thereby causing obfuscation, this study performs an empirical analysis to highlight which of the two types of complexities may be affected by IFRS application. Using the setting of IFRS adoption in the UK and a word list-adjusted component of the fog index, this study decomposes complexity into two components: information (common complexity) and obfuscation (uncommon complexity). The results reveal that IFRS adoption has increased the common complexity of accounting narratives (information) but does not necessarily increase obfuscation. The study’s contribution is twofold: methodological through the decomposition of complexity using the term weighting concept and policy-related by identifying areas of increased narrative comparability in IFRS reports. Moreover, the study’s application of complexity decomposition to IFRS is novel. Future studies may apply this by using the identified information and obfuscation components to investigate the economic consequences of IFRS-associated complexity.

Date: 2022
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/10291954.2021.1970450 (text/html)
Access to full text is restricted to subscribers.

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:taf:rsarxx:v:36:y:2022:i:3:p:171-194

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/rsar20

DOI: 10.1080/10291954.2021.1970450

Access Statistics for this article

South African Journal of Accounting Research is currently edited by Soon Nel

More articles in South African Journal of Accounting Research from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().