Cross-cultural Differences in Interpreting IAS 37 Probability Phrases

Abstract

The adoption of IFRS throughout much of the world means that accountants from different cultures will be interpreting the same set of different standards through different cultural lenses. IAS 37 relies on some particularly nebulous terminology. i.e., probable, more likely than not, and remote, that are difficult to interpret even within a culture. Building on prior research, this study explores whether accountants in different cultures interpret verbal probability phrases differently. We compare the ability of US accounting students to interpret the verbal probability of these terms to that of Russian accounting students and find these two groups differ in translating verbal phrases into numeric values but are quite consistent in their application of the accrual or disclosure decision criteria.