IFRS PRACTICAL EXPEDIENTS: Exploring antecedents of the phenomenon and preparer choices when offered simplified accounting treatments

Sammanfattning: This study investigates so-called practical expedients, a relatively new IFRS concept offering preparers simplified accounting choices. We run two parallel tracks: one qualitative part, where we analyse the definition of and the motivation for introducing practical expedients, and one quantitative part, where we collect annual report data to examine how practical expedients are applied by preparers. In this part, we analyse large, listed firms from 18 European countries. We find cost-benefit considerations and pressure from stakeholders to be the main drivers behind the introduction of practical expedients. Thus, practical expedients can be seen as a tool to overcome political pressure in the standard-setting process. This finding complements Moscariello and Pizzo (2022), the only previous study of practical expedients, who find that the IASB uses practical expedients to manage legitimacy. We apply a broader theoretical perspective, why our findings add to their results. Further, we find preparers to apply practical expedients to a varying extent across IFRS standards. We find no strong differences between countries and industries, but German-speaking countries appear to apply practical expedients more. Also, institutional- and CEO ownership has a significant influence on applying practical expedients. The lack of strong patterns is surprising, as prior research on accounting choices finds clear country- and industry trends. The research explains that the patterns arise out of incentives from the possible effect on accounting numbers. Hence, a possible explanation of our results is that applying practical expedients do not materially affect accounting numbers, which could imply that firms are not driven by other incentives than to lower reporting costs. Thus, our discussion suggests that the IASB may have found a tool for balancing costs and benefits of accounting and handling stakeholder pressure. Our findings are strengthened by our combination of qualitative and quantitative analysis, which both point in the same direction.