Purpose

The purpose of this study is to investigate the influence of IFRS convergence on annual report readability in an emerging market context, with an emphasis on the contents of management discussion and analysis (MD&A), notes to the accounts (Notes) and the whole annual report.

Design/methodology/approach

The study performs firm-fixed effect regression on a sample of 143 Indian listed companies over a period spanning from 2012 to 2021 to examine the influence of IFRS convergence on readability. This assessment primarily focuses on broader spectrums of readability dimensions, namely annual report length and complexity, wherein complexity is measured using the Gunning Fog, Flesch Reading ease and Flesch-Kincaid grade index.

Findings

As Indian firms shift to IFRS reporting, the findings suggest that annual reports have become significantly lengthier and more complex, causing deterioration in readability. The Notes section, in particular, exhibits the most significant increase in length and complexity, followed by the entire annual report and MD&A section. Furthermore, the findings also indicate that the complexity of the Notes section is instrumental in the observed complexity growth of the whole annual report in the post-IFRS period.

Research limitations/implications

The current study employs readability indices rather than directly taking into consideration the opinions of actual users of annual reports to determine readability. As a result, the study does not provide direct evidence on how information in annual reports affects users' readability.

Practical implications

The findings provide insightful information to managers and policymakers about the difficulties stakeholders may encounter while reading IFRS-based annual reports, which ultimately impact their investment decisions. Thus, there is an important managerial implication from this, depending upon the severity of complexity corporations participate in while complying with IFRS in the post-IFRS period.

Originality/value

Analyzing the influence of exogenous information shock, such as IFRS convergence, on readability is critical, particularly for emerging markets like India, where a lack of financial literacy and weaker enforcement already have detrimental effects on the capital market. In light of this, the current study provides a comprehensive examination of the impact of IFRS convergence on annual report readability and contributes to the growing IFRS literature in the less explored emerging market context.

中文翻译：

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IFRS趋同是否会影响印度上市公司年报的可读性？

目的

本研究的目的是调查新兴市场背景下 IFRS 趋同对年报可读性的影响，重点关注管理层讨论与分析 (MD&A)、账目附注 (Notes) 和整个年报的内容。

设计/方法论/途径

该研究对 2012 年至 2021 年期间 143 家印度上市公司的样本进行了公司固定效应回归，以检验 IFRS 趋同对可读性的影响。该评估主要关注更广泛的可读性维度，即年度报告长度和复杂性，其中复杂性是使用 Gunning Fog、Flesch 阅读难度和 Flesch-Kincaid 等级指数来衡量的。

发现

随着印度公司转向采用国际财务报告准则（IFRS）报告，调查结果表明，年度报告变得明显更长、更复杂，导致可读性下降。尤其是注释部分，其长度和复杂性增长最为显着，其次是整个年度报告和 MD&A 部分。此外，调查结果还表明，注释部分的复杂性对观察到的后国际财务报告准则时期整个年度报告的复杂性增长起到了重要作用。

研究局限性/影响

目前的研究采用可读性指数，而不是直接考虑年报实际使用者的意见来确定可读性。因此，该研究没有提供年度报告中的信息如何影响用户可读性的直接证据。

实际影响

研究结果为管理者和政策制定者提供了有关利益相关者在阅读基于 IFRS 的年度报告时可能遇到的困难的深刻信息，这些困难最终影响他们的投资决策。因此，这具有重要的管理意义，具体取决于公司在后 IFRS 时期遵守 IFRS 时所参与的复杂性的严重程度。

原创性/价值

分析外部信息冲击（例如《国际财务报告准则》趋同）对可读性的影响至关重要，特别是对于印度等新兴市场而言，这些市场缺乏金融知识且执行力度较弱，已经对资本市场产生了不利影响。有鉴于此，本研究全面审视了国际财务报告准则趋同对年度报告可读性的影响，并为在探索较少的新兴市场背景下不断增长的国际财务报告准则文献做出了贡献。