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Abstract
I assess whether translations of IFRS published by the IASB (at staggered intervals) are effective at improving financial statement comparability and accounting quality (proxied by higher quality accruals and more timely loss recognition). Using a matched sample of 1,601 English- and non-English-speaking firms, I hypothesize and find that overall, translations are significantly associated with increases in comparability, but have mixed results with accounting quality. I also find that as the distance between the translated language and English increases, it becomes more difficult to translate IFRS. Specifically, translations into low-linguistic-distance languages are associated with significant increases in comparability and mixed results for accounting quality, while translations into high-linguistic-distance languages are associated with significantly smaller increases in comparability, and significant reductions in accounting quality. These results are robust to differences in (1) culture, (2) English fluency rates, (3) the level of market development, and (4) different model specifications. I provide the first empirical evidence that the IASBs translations generally increase both earnings comparability and accounting quality, but that high-linguistic-distance attenuates these benefits.