Is There a Conflict between Principles-Based Accounting and Structured Electronic Reporting? – A Literature Review

16 Pages Posted: 14 Nov 2016

See all articles by Dirk Beerbaum

Dirk Beerbaum

Frankfurt School of Finance & Management; Aalto University - Department of Accounting and Finance; Aalto University - School of Business

Maciej Piechocki

Independent

Date Written: November 13, 2016

Abstract

National standard-setters continue to express concerns over a principles-based developed IFRS taxonomy. Recent comments to the IASB consultation on the "IFRS Taxonomy Due Process" contain more arguments why principles-based accounting and the IFRS taxonomy are perceived as a conceptual conflict.

A comment from the Accounting Standards Committee of Germany: "Whilst we acknowledge that standard-setting and taxonomy development can and should inform each other, we are concerned that mandatorily bearing taxonomy constraints and limitations in mind when developing standards bears the risk of the standards themselves becoming more rules- and less principles-based. We certainly agree that the pronouncements must be articulated clearly enough to enable appropriate representation through the taxonomy; however, a taxonomy’s requirements should not be the key driver for developing standards and interpretations."

Similar arguments are expressed by the Accounting Standards Council Singapore: "We are particularly concerned that the prescriptive nature of IFRS Taxonomy would not align well with the principles-based IFRS."

The Swedish Financial Reporting Board wrote, "We fear that bringing XBRL into standard setting will be detrimental to the principles-based approach, particularly as regards the presentation of disclosures."

The Korean Accounting Standards Board also comment, "It should be more conspicuously clarified that the IFRS Taxonomy is not guidance for IFRS in order not to deteriorate the principles-based standard-setting approach."

Another commentator from a Big-4 audit firm: "There is a risk that the design and content of a taxonomy that is intended to be used to capture information in general purpose financial reports will, or be perceived to, influence how those reports are prepared. Filing requirements that used prescribed data structures could undermine principles-based reporting requirements. We understand and share those concerns. However, this is the very reason that the IASB should be involved with the development and maintenance of the IFRS Taxonomy. If the IASB is not, others will develop taxonomies and we are more concerned about the risk that those taxonomies pose to the application of IFRS."

"EFRAG has expressed on several occasions the view that the development of the IFRS taxonomy should not drive the IASB standard-setting process, because it risked moving away from a principles-based approach, in particular in the area of disclosures."

Considering the Italian Standard Setter, "However, we reiterate our comments made with references to the Request for Views Trustees' Review of structure and Effectiveness: Issues for the Review that the Taxonomy should not be integrated in the IASB standard-setting process because we see the risk that this may take the IASB away from a principles-based approach when it develops accounting standards, in particular in the area of disclosures. IFRS taxonomy-related issues should be kept separate from the standard setting process as we fear that considerations that regard the Taxonomy may have a negative impact on the principles-based approach."

Keywords: Taxonomy, principles-based, rule-based, IFRS, Standardsetter, elctronic structured reporting

JEL Classification: MA1

Suggested Citation

Beerbaum Dr., Dirk and Piechocki, Maciej, Is There a Conflict between Principles-Based Accounting and Structured Electronic Reporting? – A Literature Review (November 13, 2016). Available at SSRN: https://ssrn.com/abstract=2868800 or http://dx.doi.org/10.2139/ssrn.2868800

Dirk Beerbaum Dr. (Contact Author)

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

Aalto University - Department of Accounting and Finance ( email )

P.O. Box 1210
Helsinki, 00100
Finland

Aalto University - School of Business ( email )

Finland

Maciej Piechocki

Independent ( email )

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