The effect of IAS 1 amendments on disclosure quality: Evidence from a Swedish context - A study investigating boilerplate and stickiness in relation to the amendments to IAS 1

Abstract

Background: In January 2016 the amendments to IAS 1, as proposed by the IASB, became effective, with the intended outcome to increase the disclosure quality. These amendments have been developed in order to adjust for the existing issue of disclosure overload within annual reports, i.e. the amount of boilerplates and stickiness of disclosures. Purpose: This thesis has examined whether these amendments have had the intended outcome, by investigating if the phenomena boilerplate and stickiness have decreased within annual reports for Swedish listed companies. In addition to this, the thesis investigated if firm size, audit firm and industry have any effect on disclosure quality. Additionally, it investigates if larger companies have adopted the new amendments more in line with the intended outcome. Research design: In order to investigate the purpose of this thesis the disclosed information about accounting policies and critical judgements and estimates in annual reports for Swedish listed companies have been analysed, over a time period of four years. Consequently, the phenomena boilerplate and stickiness have been defined by measures, where Computer-Aided Text Analysis (CATA) has been utilised. Results and conclusion: This thesis found that there is a tendency towards the intended outcome, meaning that the companies’ disclosures have become better. Further, it is found that firm size seems to impact the disclosure quality and that bigger companies tend to have adopted the amendments to a larger extent. However, the result for audit firm showed that companies not using one of the Big 4 audit firms tend to have better disclosure quality. Lastly, the result did not show any difference within disclosure quality between manufacturing and nonmanufacturing companies. Limitations: The measurements provided in this paper could be argued to require further validation, since boilerplate and stickiness are areas that have not yet been subject to much research. Further, the sample could be argued to be insufficient, explainable by a shortfall due to time consuming manual collecting and testing. Lastly, the division between companies having either the Big 4 or others, as audit firm, could be argued to be inadequate. Suggestions for future research: In line with the findings of this thesis, a replica of this study, in a few years, would be of interest in order to see if the effect of the amendments have become more substantial. Additionally, it would be interesting to broaden this study and include several countries that apply IFRS in order to get a larger sample. Furthermore, there is a need to further validate the proxies for our variables.