Accounting, Edition 53

Language and Culture in the Interpretation of the IFRS

By: Yanira Petrides, Instituto Tecnológico Autónomo de México
Esperanza Huerta, San Jose State University
Gary Braun, University of Texas at El Paso

International Financial Reporting Standards (IFRS) are technical standards that guide the activity of a professional accountant in the preparation of a company’s financial statements.

These rules are issued in English by the International Accounting Standards Board (IASB). Even with an official translation of the international standards to other languages, the international financial reporting standard 1 (IFRS1) states that the official language for the interpretation of IFRS is English.

The goal of having an official language is that the intent of the original standard is followed and that the standard is not interpreted differently. It is important that accountants interpret the standards in the same way so that the objective of comparability of financial statements is met. When a rule is interpreted in different ways, the financial statements are not comparable; i.e. the comparability of financial statements depends not only on having common standards, but also on having the standards interpreted in the same way. For example, in the United States, the Financial Accounting Standards Board (FASB) and the Securities and Exchange Commission (SEC) have indicated that, in the convergence of standards, comparability is an important objective.

Although the international standards are issued and published in English, the IASB allows their translation into other languages, provided that the official procedure is followed. This procedure requires a review by expert translators and by a committee of expert accountants in the language into which the standard is translated. The translation is supervised by the IFRS Foundation to ensure uniformity. Only one official translation is authorized and published for each language, because multiple translations could decrease the comparability and transparency of the financial statements.

However, a 2002 survey indicates that professional accountants translate the official English version into their normal working language. But without a systematic method to translate the accounting standards, the translation could change the meaning and the interpretation of the original standard in English.

When translating accounting standards, it should be taken into account that the standards include both technical and generic terminology. Technical terminology includes words or phrases that have a specific meaning in accounting, that is, accounting vocabulary such as “asset” or “liability.” Generic terminology includes words or phrases that are commonly used, such as “likely” or “remote.”

The terminology of the natural sciences is extremely precise. In contrast, social sciences rely more on generic phrases. Although accounting has always used terminology and specialized vocabulary, it also uses generic phrases. Technical terms are easier to translate and depend less on the culture. For example, the English term “asset” translates directly into Spanish as “activo.”

Generic terminology is more difficult to express in another language. There are studies that show that certain words are not easy to translate or have no equivalent in other languages. When a term in the source language has no equivalent in the target language, people translate it with the closest word(s) they can find. The imprecision in this translation process may cause the exact desired meaning in the source language to be lost.

Thus, while the issuer of the international standard has a concept in mind in English, this concept may not be translated in the same way into other languages. The result is that the same concept in English may be translated with different words in another language, which could lead to different interpretations of the standard. Therefore, the accuracy in the translation is an element as important as the standard itself. With a clear and accurate translation is possible to avoid phrases leading to various interpretations that would in turn make more difficult the comparability of financial information worldwide.

The translation of accounting norms is even more important when using principle-based standards, such as IFRS. Principle-based standards, unlike rule-based standards, give general principles of implementation. Accountants should use their professional judgment to interpret the general principle to a particular situation. For example, the accounting standard for revenue recognition indicates in a general way that one of the requirements to recognize revenue is that the revenue is more likely to occur than not. Accountants must exercise their professional judgment to determine, in a particular case, whether the revenue is more likely to occur than not.

The use of professional judgment to interpret the standards impacts the resulting financial information. For example, international standard 37, which regulates the recognition of contingent assets, uses the generic English word “practicable,” which is translated into Spanish as “prácticamente seguro” (almost certain). Thus, it is crucial that the IASB or local accounting organizations identify the generic phrases that can lead to differences in translation to guide the accountants on the correct interpretation.

Studies conducted in various countries found that generic phrases vary in their translation, because of the language and the cultural interpretation that is made of them. These differences in translation not only occur between countries, but also within the same country. For example, in Canada, Davidson and Chrisman (1993, 1994) found differences in the interpretation of generic phrases that reflect expressions of uncertainty (for example, “probable” or “uncertain”) in the International Accounting Standards and the Canadian Accounting Standards. In addition, they found that Canadian students understood the word “uncertainty” in a different way when they were speaking in French or in English. Several studies have noted and shown that differences in translation and interpretation can lead to problems that are detrimental to the comparability of financial statements. Therefore, a greater understanding of the sources and nature of these differences will help regulatory agencies to mitigate this threat.

Baskerville and Evans (2011) recommend to the standard issuing bodies and to the regulators to be aware of the difficulties in translating generic words and to take these words into account starting from the drafting stage of the norm. They explained that the interpretation of accounting standards not only depends on the technical capacity and professional experience of the accountant, but also on the language used to convey the standard and the generic language, which is a barrier for the harmonization of the accounting norms. When using generic language, the same rule can be interpreted in different ways, which ultimately causes differences in the figures reported in the financial statements.

The culture associated with the language also plays an important role in translations. A field that has gained attention is the study of the influence of culture on the interpretation of expressions of uncertainty, which often appear in accounting standards. The local culture may prevent accounting standards from being applied uniformly in all cultures when dealing with this type of expressions.

Languages can be classified as “high context” or “low context.” Hall (1976) argues that written communication in low-context languages tends to be more explicit; the content of the message is understood in a direct way because words have specific meanings. In high-context languages, written communication is less explicit; the content of the message is understood by both the words and the context in which they are used – that is to say, in high-context languages important aspects of the message are understood implicitly.

ranslating low-context languages into high-context languages poses the additional difficulty of ensuring that the message in the high-context language represents the original intention expressed in the low-context language. That is why the accurate translation of the international standards into Spanish is a challenge. English —the original language of the international standards— is a low-context language while Spanish is a high-context language.

The effect of context on the language used in the accounting standards is important for accountants who use a language other than English in their work. At least, they should be aware of the potential impact that the variation in the translation of key terminology for accounting standards could have on the decisions they make in the preparation of financial statements. In addition, accountants need to review and assess the changes in the regulations.


Baskerville, R., y L. Evans (2011). The darkening glass: Issues for translation of IFRS. Edimburgo: The Institute of Chartered Accountants of Scotland.

BDO, Deloitte Touche Tohmatsu, Ernst and Young, Grant Thornton, KPMG and Pricewaterhouse Coopers (2003). GAAP Convergence 2002: A survey of national efforts to promote and achieve convergence with International Financial Reporting Standards (investigador: D. L. Street).

Davidson, R. A., y H.H. Chrisman (1994). “Translations of uncertainty expressions in Canadian accounting and auditing standards”. Journal of International Accounting, Auditing and Taxation, 3(2), 187–203.

Doupnik, T. S. y E.L. Riccio (2006). “The influence of conservatism and secrecy on the Interpretation of verbal probability expressions in the Anglo and Latin cultural areas”. The International Journal of Accounting, 41(3), 237–261.

Doupnik, T. S., y M. Richter (2003). “Interpretation of uncertainty expressions: A cross-national study”. Accounting, Organizations and Society, 28(1), 15–35.

Doupnik, T. S. y M. Richter (2004). “The impact of culture on the interpretation of ‘in context’ verbal probability expressions”. Journal of International Accounting Research, 3(1), 1–20.

Hall, E. T. (1976). Beyond culture. Garden City: Anchor Press.

Huerta, Petrides y Braun, 2013, “Translation of IFRS: Language as a barrier to comparability”. Research in Accounting Regulation, 25(1), 1-12.

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