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IFRS terminology is not equivalent across languages

The problem of achieving equivalence in accounting translations has already been addressed (towards the end of Section 3). This has been a major issue in the translation of IFRS ever since their conception since we find the same distinct lack of semantic equivalence. Professionals closely involved in IFRS are also increasingly becoming aware of the discrepancies. With reference to French and English, Peter Walton, the IFRS director at the ESSEC KPMG Financial Reporting Centre, has come to the conclusion that IFRS mean different things in different languages (reported in Cohn 2013:1-2). This becomes yet more apparent in the foreword to one of the bilingual editions of official EU IFRS standards, the Wiley version, which simply states that the German translation is “in some places inexact or even wrong” (Wiley 2014: vii).

Part of the problem is that, for IFRS, two different translation systems are currently at work. The European Union handles translations for all EU languages, mostly through its Directorate General for Translations. The actual work is either done by in-house translators or outsourced to external translators, as is the case for more than a quarter of European Commission translations (European Commission 2014). Non-European languages, on the other hand, are the responsibility of the IFRS foundation, where the translation process is fairly complex (see Figure 21.2). This two-pronged approach to translating IFRS is seen in itself as a source of translation discrepancies (Kettunen 2011: 9; Baskerville and Evans 2011a: 6).

Official IFRS Foundation translation process of (adapted from IFRS Foundation 2014)

Figure 21.2: Official IFRS Foundation translation process of (adapted from IFRS Foundation 2014)

Quite apart from problems of equivalence, a number of errors and omissions can still be found in IFRS that are likely to be simply a result of inaccurate and careless translations. An example of an omission can be found in IAS 32, paragraph AG 19, where the two versions read as follows (bold print added):

English: “including interest rate and currency swaps, interest rate caps, collars and floors”

German: “einschlieBlich Zins- und Wahrungsswaps, Collars und Floors”

Here, the German version simply leaves out interest rate caps. It is unlikely that this omission was intentional, as the term could easily have been translated into German (e.g., as Zinscap, a commonly used English/German hybrid). Another example is found in IFRS 2, paragraph B39, where the English term held in treasury is, in German, translated as simply gehalten. Again, the expression in treasury is not translated into German.

An example of an interpretation error is provided by IAS 36, paragraph (App.) A1. (bold print added):

English: “represented by the current market risk-free rate of interest

German: “der durch den risikolosen Zinssatz des aktuellen Markts dargestellt wird”

While in English the expression refers to a current rate of interest, the reference has been switched in German, where current now refers to market, which looks unusual to say the least.

What makes these errors, and many other examples, worrying is the fact that they are apparently not rectified on any systematic basis. They were still part of the official EU texts at the time of writing, some five years after they were detected in the respective standards. Further examples of translation inaccuracies in IFRS abound. Some relating to the German translation of IFRS can be found in Niehus (2005), as well as Hellmann, Perera, and Patel (2010:12-14). Nobes and Parker (2008:149) list errors from Norwegian and Portuguese, and Tsakumis, Campbell, and Doupnik (2009: 36-37) provide others from Spanish, German and French. All these examples refer to official IFRS documents, so it would be of interest to take a look at the way companies handle things as well.

In companies, foreign language versions of financial reports, particularly English ones, are usually handled by external translators. Such texts include a great variety of terms, to a certain extent due to the problems inherent in translating IFRS terms described in Section 2. However, in the long run, a slow convergence towards IFRS terminology can be expected, as translators increasingly come to rely on documents based on IFRS. The Big Four accounting firms, for instance, all offer a free download of what they variously call “model” or “illustrative” financial statements/reports in several major languages. These materials are already widely used in the translating community, and, as the terminology used is almost completely standardised, this is bound to have a unifying effect on the reporting terminology used. Table 21.5 provides the links to the (at the time of writing) latest English and German language versions of these documents (accessed 21 May 2015).

Table 21.5: Big Four standardised model financial reports

Deloitte model financial reports

English

Date

German

Date

http://www.iasplus.com/en/

publications/global/models-checklists/

2014/ifrs-mfs-2014

2014

http://www.iasplus.com/de/

publications/german-publications/

models-and-checklists/ifrs-model-

financial-statements-for-2014-german

2014

KPMG guide to financial statements

English

Date

German

Date

http://www.kpmg.com/Global/en/

IssuesAndInsights/ArticlesPublications/

IFRS-guide-to-financial-statements/

Pages/guide-IFS-disclosures-sept14.

aspx

2013

http://www.kpmg.at/publikationen/

publikationen-details/1863-ifrs-muster-

konzernabschluss-dezember-2013.html

2013

PwC illustrative financial statements

English

Date

German

Date

https://inform.pwc.com/inform2/show?

action=informContent&id=

1414242310168538

2014

http://www.pwc.de/de_DE/de/

rechnungslegung/assets/

musterkonzernabschluss_8_auflage.pdf

2012

EY illustrative financial statements

English

Date

German

Date

http://www.ey.com/GL/en/Issues/IFRS/

Issues_GL_IFRS_NAV_Core-tools-library

2014

http://www.ey.com/Publication/

vwLUAssets/EY_IFRS_Muster_

Konzern_Zwischenabschluss_2014/

$FILE/EY-IFRS-Good-Group-

Zwischenabschluss-2014.pdf

2014

The latest versions available once more show the predominance of English as the language of accounting: while the English versions are practically always up-to-date, the German translations are not. As the changes from year to year rarely affect terminological issues, though, this is of little consequence from a language point of view.

According to Hellmann, Perera, and Patel (2010: 3), (flawed) translation is a “threat to comparability” and an “impediment for a consistent application and interpretation of IFRS”. Norberg and Johansson (2013: 43) also argue that “terminological uniformity is needed to promote transparency and comparability in accounting communication”. Yet this uniformity is not easily achieved because the translation problem can only be solved partially. What does seem important is that translators have a solid understanding of accounting as well as the cultures of the two languages involved, which is not always the case in practice (Kettunen 2011:16-17). In an extensive study, Baskerville and Evans (2011a) surveyed a large number of practitioners involved in translating textbooks. Many of these are also active in IFRS translations or involved with IFRS in other ways. The respondents did not see translations as impossible, but generally agreed that “exact equivalence cannot be achieved” and that translators are forced to resort to interpretation (Baskerville and Evans 2011a: 6). The translators, of course, try to remedy this deficiency, but in many cases it is extremely difficult to find a solution. As Kettunen (2011: 9) states, the International Accounting Standards Board, for example, asks for word-for-word equivalents, which is just not possible in most cases. Greater awareness of this situation is therefore crucial in order to minimise misreadings and misunderstandings.

 
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