ISSUES IN ACCOUNTING EDUCATION

Vol. 28, No. 2

2013
pp. 209220

American Accounting Association

DOI: 10.2308/iace-50391

Global Adoption of International Financial

Reporting Standards: Implications for
Accounting Education
Beverley Jackling
INTRODUCTION

ore than 120 countries now require or permit the use of International Financial
Reporting Standards (IFRS) or are converging with IFRS as issued by the International
Accounting Standards Board (IASB 2011). The objective of the IASB is to develop a
single set of high-quality, understandable, enforceable, and globally accepted financial
reporting standards based upon clearly articulated principles (IASB 2012a). This entails
principles-based standards, where the various recognition, measurement, presentation, and
disclosure principles of the standard are informed by concepts contained in the IASBs
Conceptual Framework.
Given that more than 120 countries have or are in the process of transitioning to IFRS,
global financial reporting is rapidly becoming a reality. It is therefore timely to reflect on the
development, application, and implications of IFRS and their implications for accounting
educators. It is crucial for the success of the global adoption of IFRS to build not only an
infrastructure of knowledgeable IFRS educators, but also teaching resources that are informed
by the principles-based IFRS. This special section of Issues in Accounting Education (IAE)
aims to provide an overview of some of the factors for accounting educators to consider in
IFRS adoption. Additionally, the articles in this section outline the experiences of accounting
faculty from eight countries in teaching IFRS. The critical message conveyed is that, as the
global financial reporting standards are increasingly adopted, educators need to adapt their
teaching practices to meet the challenges of IFRS.
Motivation for This Special Section on Teaching IFRS
In this first paper of the special section there are two main aims. The first aim is to provide a
background to the motivation for this special section of the journal including an overview of the

Beverley Jackling is a Professor at Victoria University.

The author acknowledges the contribution of Michael Wells (director) Education Initiative IFRS Foundation, for
contributing the background information on the Education Initiative and the case study used in this paper to illustrate the
need for judgment in applying principles-based IFRS. A special note of thanks is also extended to Paul Pacter of the
IASB for his contribution to this special section of the journal.

Published Online: January 2013

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experiences of educators from various parts of the world in teaching IFRS. The second aim is to
provide an overview of some of the initiatives that have been undertaken to improve the quality of
teaching IFRS. The paper demonstrates the significant changes in approach to teaching that are
required when IFRS is adopted. A case study is also provided by the IFRS Education Initiative
Director, Michael Wells, to illustrate the need to develop students ability to make judgments and
estimates that are necessary to apply to IFRS.
BACKGROUND TO THE SPECIAL SECTION ON TEACHING IFRS
In August 2010 at the AAA Annual Meeting (San Francisco, CA) the newly appointed editor of
IAE, Bill Pasewark, commented on the concerns that were being expressed by American academics
about their preparedness for teaching IFRS. His observation was that in countries that had adopted
IFRS, faculty had the potential to make a significant contribution to the accounting education
literature by sharing their experiences and assist others about to embark on the journey of
transitioning to IFRS. The concerns about U.S. academics preparedness for teaching IFRS were
reinforced by the results of the annual survey of accounting faculty that has been conducted each year
since 2008 by the American Accounting Association (AAA) and KPMG (KPMG and AAA 2011).
For example, in 2008 the responses from 535 U.S. academics indicated that 79 percent identified the
development of IFRS materials as highly challenging, and 72 percent similarly identified making
room in the curriculum for IFRS as highly challenging (Munter and Reckers 2009).
The observations of the editor of IAE, together with the findings from the KPMG and AAA
survey (2009 to 2011), provide the backdrop for this special section of the journal outlining the
experiences of accounting educators in teaching IFRS. In consultation with the editor it was decided
that the format of the articles would be informative not only to U.S. academics, given adoption of
IFRS was anticipated to occur in the following 25 years (Street 2012), but also to academics in
other parts of the world about to embark on teaching IFRS. Thus, the wheels were set in motion to
commence the preparation of this special section of IAE on teaching IFRS.
Invitations were issued to academics in eight countries to share their teaching experiences of
IFRS: Australia, Brazil, Canada, China, France, Russia, South Africa, and the United Kingdom.
The inclusion of papers from eight countries not only ensured coverage from each of the inhabited
continents of the world, but also represented a blend of countries that included early and emerging
adopters of IFRS. In particular, the experiences of Brazil, China, South Africa, and Russia provide
contextual differences including cultural, language, and political factors that have been
acknowledged as impacting not only on adoption of IFRS, but have implications for accounting
educators in teaching IFRS (Baskerville and Evans 2011).
It was anticipated that the special section would have a blend of reflective accounts of the
adoption of IFRS (for example, the U.K.), while other articles would represent accounts of
transition (like Canada). Guidelines were provided to authors based on the format below:
Each of the articles would have some common themes to address that would specifically relate
to the country. For example:




Short history of the past rules governing accounting;

Description of how and when conversion/adoption to/of IFRS has or will be made; and
Indication of how certification requirements have changed due to the transition.

Articles would also address one or more aspects of particular interest to the author team or relevant
to the country e.g., from the list below:




Ways in which the academic community was prepared for conversion to IFRS;
Specific teaching strategies that may have worked well;
Difficulties or unexpected aspects in the transition;
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Lessons learned (for teaching); and

Anticipated issues that remain to be addressed in the transition.
THE EXPERIENCES OF EDUCATORS IN ADOPTING IFRS

The articles in this special section each outline distinctive characteristics of the country and
when compared with other countries, serve as an illustration of the complexity and enormity of the
task of adopting one global set of accounting standards. The papers collectively highlight some of
the challenges that have been addressed by accounting educators as well as in many instances,
identifying challenges yet to be conquered in the transition to IFRS. It is not the intention in this
overarching paper to provide a comprehensive overview of each paper in the special section;
however, I endeavor in the remainder of this section to address some of the common themes that are
featured in the papers from the eight countries including the preparation for IFRS, teaching
strategies, difficulties encountered, lessons learned, and issues that remain to be resolved in the
adoption and teaching of IFRS.
The Preparation of Educators for IFRS Adoption
In terms of the preparation for IFRS there are clearly differences among the experiences of the
eight countries. A comparison of the main features of each paper illustrates that early adopters of
IFRS were countries more closely aligned with the British legal system, for example Australia, the
United Kingdom, and South Africa. Canada, although adopting IFRS in more recent times, given
their British Colonial background, similarly appears to have involved a transition to IFRS requiring
few adjustments for accounting faculty (Hilton and Johnstone 2013 [see this issue]). The evidence
provided by authors suggests that the transition to IFRS from local accounting standards in these
countries was relatively seamless compared with some other countries where the cultural and
political systems have typically been more diverse (for example, Brazil, China, and Russia). In
other jurisdictions such as France, despite adopting IFRS in 2005, the transition from French GAAP
was viewed as a substantial change from a rules-based to a principles-based approach to accounting
standards (Bonnier et al. 2013 [see this issue]). Furthermore, in countries such as Brazil the
adoption of IFRS represented a true revolution in approach. In fact, the departure from the countrys
local code law, philosophy, and tax-inspired accounting in favor of a principles-based
approach continues to be a major educational challenge for faculty and students (Carvalho and
Salotti 2013[see this issue]).
Teaching Strategies that Have Worked Well
Authors have outlined in this special section that the transition to IFRS has, in some instances,
provided an impetus for educational change that has been taken on board by accounting educators.
For instance, Hilton and Johnstone (2013) indicate that the opportunity to teach core principles
rather than rules has been advantageous in developing the professional skills of accounting
students. In Brazil, the accounting academic community has been heavily committed to preparing
case studies (both real and hypothetical) that highlight the importance of the decision-making
process as a feature of IFRS. There has also been a conscious effort in Brazil to have accounting
students visit firms that have adopted IFRS to share views on the complexities and responsibilities
of the accounting profession. The French authors note that in their universities they have an
increasingly diverse student cohort that will have exposure to IFRS in their future employment
across the globe. This increased diversity has meant that accounting faculty have needed to
recognize and act appropriately in the change from French GAAP to IFRS.
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Difficulties Faced by Educators in the Transition to IFRS

The difficulties faced by accounting faculty in the transition to IFRS can be categorized broadly
into culture, language, political, and educational issues. The situations in Brazil and Russia
highlight the lack of teaching resources in the language used for instruction; in particular, a lack of
textbooks has been a major impediment to teachers of IFRS. In Russia not only was there a
language difficulty, but a major obstacle to the adoption of IFRS was the difference between
national and international standards and accounting practices due to historical, cultural, and legal
traditions. Consequently, the implementation of the reforms in accounting education were delayed
due to a tradition of lax financial reporting, which was a legacy of the Soviet regime. The major
reforms in their political and economic spheres of life, which flowed to the tertiary education
system, meant that changes in accounting education were delayed.
A review of the non-English language nations supports Baskerville and Evans (2011)
assertion about the unique set of challenges faced by several countries in implementing IFRS,
where equivalence is difficult to achieve in translation particularly when a concept does not form
part of a countrys culture. For Russian accounting academics, the first translation of IFRS into
Russian occurred in November 2011. However, despite the translations, major errors and
inaccuracies have occurred in the process of translation.
The South African experience (Coetzee and Schmulian 2013 [see this issue]) illustrates that
where there are two languages used in university education i.e., Afrikaans and English, additional
language difficulties occur as well as ideological differences in pedagogical approaches reflecting
the cultural links with language. The Afrikaans universities face increased difficulties as the
financial reporting standards are no longer available in Afrikaans. As Coetzee and Schmulian
(2013) state, this has placed additional pressure on accounting educators in terms of translation of
teaching resources, especially in ensuring as best possible, that unintended meaning is not
introduced through translation.
In Brazil the language barrier has also emerged as a potential impediment to the transition to
IFRS. However, this has been minimized to a certain extent because most standards have already
been translated to Portuguese. Carvalho and Salotti (2013) state it is not uncommon for some
accounting topics to reference both the Committee of Accounting Pronouncements (CPC)
Portuguese-language pronouncements as well as the English-language IFRS issued by the IASB.
As France was an early adopter of IFRS, accounting academics had to create their own teaching
materials given the teaching resources needed to be written in French.
Despite the many difficulties outlined by authors there are some useful and indeed exceptional
insights from authors as to the lessons learned and, in particular, the positive outcomes for
accounting education that have resulted from the transition to IFRS.
Lessons Learned (or to Be Learned)
Overall the papers in this special section provide readers with some important insights into the
adoption of IFRS. While it is difficult to generalize, the one consistent theme is that IFRS has
provided an opportunity for educators to rethink and critically examine their approach to teaching.
For example, the Canadian experience illustrates that educators, when transitioning to IFRS, were
able to develop teaching strategies that emphasized a principles-based approach that was not
constrained by technical content and encouraged deeper approaches to learning. IFRS provided the
French educators with an opportunity to enrich the curriculum. Bonnier et al. (2013) were
pleasantly surprised that students studying at their university in France were openly receptive to
change and their satisfaction with the different approach to teaching financial accounting was also
reflected in positive student evaluations of courses.
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In contrast, the Australian experience outlined in this special section indicates that although the
transition to IFRS meant there were minimal changes in accounting standards from the previous
Australian standards, this led to some complacency by accounting educators. The authors claim that
a reluctance to revisit pedagogy and the reliance on existing textbooks meant that when IFRS was
adopted in 2005, a number of opportunities for improvement in teaching and learning were
squandered. In retrospect, the one important lesson learned from the Australian experience was that
a more focused approach to professional development activities for accounting educators would
have been valuable and remains an area for improvement.
One sobering comment from the U.K. experience is that, given IFRS and its predecessor U.K.
GAAP are both predominantly principles-based regimes, there has not been a significant change in
approaches to teaching and learning. Stoner and Sangster (2013 [see this issue]) note that
accounting programs for many years have endeavored to make students think. Despite these
efforts, many students prefer a more rules-based mode of learning and understanding that has
notions of right and wrong answers to problems. The U.K. authors suggest that, as such, the
principles-based approach of IFRS, like the U.K. GAAP that preceded its adoption, has not had a
significant impact on changing approaches to learning.
Issues that Remain to Be Resolved
Indications from the authors of the papers in this special section demonstrate that there are
unresolved issues in teaching IFRS. In particular, IFRS teaching resources appear to remain an
issue for educators regardless of whether the country is an earlier adopter or has more recently
transitioned to IFRS. Accompanied with the need for more resources is the requirement for the
provision of Continuing Professional Development (CPD) for accounting educators. For instance,
in Russia the strong demand for IFRS trained accountants has heightened the need to retain
accountants and educators. Vysotskaya and Prokofieva (2013 [see this issue]) indicate that Russia is
endeavoring to employ a shock therapy approach to accomplish large-scale reforms in a very
short period of time, given the mandatory adoption of IFRS in 2012. For others that have
transitioned to IFRS as far back as 2005, the need for CPD of accounting educators remains an issue
(see in this issue, papers on Australia, South Africa, and France that highlight the need for CPD).
U.S. Adoption of IFRSAn Unresolved Issue from an Educational Perspective
It would be remiss to not provide an update on the transition to IFRS in the United States in this
overview article of the special section on teaching IFRS. Adoption of IFRS in the U.S. is, for the
purposes of this article, categorized as an issue that remains unresolved.
In 2010 there was an air of anticipation in terms of the U.S.s adoption of IFRS. Therefore, the
decision of the Securities and Exchange Commission (SEC) in 2012 to defer indefinitely the use of
IFRS was for many an unexpected outcome. The SEC staff report issued in July 2012 did not
contain a recommendation about whether, how, and when IFRS will be adopted in the U.S. Instead,
a recommendation will be announced separately, on an as yet, undetermined date (Brown and Tarca
2012).
While it is not the intention in this paper to debate the pros and cons of the adoption of IFRS by
the U.S., 2012 has been viewed as a year of significant setback in achieving greater global adoption
of IFRS. The IASB wanted a firm date from the United States to bolster convergence work and
encourage countries like Japan, Singapore, and Malaysia to progress the global adoption of IFRS.
The failure of the SEC staff report to give an indication of IFRS adoption in the U.S. has potentially
had a cascading effect in terms of other major economies that are yet to fully adopt IFRS.
Despite the uncertainty that now exists, with regard to the U.S.s adoption of IFRS, educators
have shown continued confidence that the U.S. will eventually adopt IFRS at some point in time. It
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is of interest to note however, that confidence of educators in the adoption of IFRS was waning in
2011 compared with past years as measured by the KPMG and AAA annual survey of accounting
academics. In 2011 although a majority of respondents (54 percent) were confident of IFRS
adoption, this confidence level was lower than in previous years, for example in 2009 when 68
percent of respondents expressed confidence in IFRS adoption (KPMG and AAA 2011). Despite
this decline in confidence most respondents in 2011 (85 percent) continued to believe that it was
important for U.S. faculty to teach IFRS.
The evidence exists from the KPMG and AAA 2011 survey that approximately 40 percent of
respondents already incorporate IFRS significantly into their curriculum, with another one-third
indicating that IFRS should be incorporated significantly in the curriculum in the next year or so.
The format of IFRS incorporation into the curriculum includes 62 percent indicating that IFRS has
been integrated into an existing course, while 17 percent created a separate graduate course, 12
percent a separate undergraduate course, while 15 percent actively assessed an appropriate course of
action. Therefore, despite the most recent proclamation from the SEC, there is evidence to suggest
that U.S. accounting educators maintain a commitment to teaching IFRS.
Some commentators believe that the SECs continued indecision on IFRS leaves the United
States isolated and limits U.S. companies access to international capital (Tysiac 2012). However,
in some respects the failure of the U.S. to endorse IFRS is indicative of American exceptionalism as
described in the context of adoption of IFRS by de Lange and Howieson (2006). They suggest that
political processes and power play by those in positions of influence, combined with a strong
national identity and ideology, will ultimately determine the future of U.S. GAAP and its transition
to IFRS (de Lange and Howieson 2006, 1029).
From an adoption perspective, the creation of IFRS as one global set of accounting standards
has embraced and intensified a global perspective of accounting. This global perspective of
accounting perhaps provides one less reason for the U.S. to avoid the adoption of IFRS. Indeed the
growth in the adoption of IFRS around the world threatens the U.S.s long-term dominance of
international accounting standards. As Street (2012, 270) states:
Failing adoption, or some other form of IFRS incorporation, the SEC must expect that the
ability of the U.S. to influence global standards will be diminished . . .Clearly the SEC
should acknowledge that, if the U.S. is to continue to play a significant role in the
development of the accounting standards that represent the global norm, IFRS will have to
be incorporated into the U.S. financial reporting system.
The recent announcements of the SEC and a lack of a timeline for further consideration of
IFRS (Tysiac 2012) means that U.S. educators are left without clear direction for the teaching of
IFRS.
PEDAGOGICAL APPROACHES TO TEACHING IFRS
The second section of this paper outlines the distinctive features of IFRS in terms of the
importance of principles-based standards for the way we teach. This section also addresses teaching
resources including a case study, as well as the current and future directions of the IFRS Education
Initiative in supporting accounting educators.
What Do Principles-Based Standards Mean for the Way We Teach?
Principles-based standards offer an opportunity for accounting educators around the world to
revisit the pedagogical models they use; rather than educating students in transferable concepts or
use by date rules (Jackling et al. 2012). Financial reporting education should commence with the
Conceptual Framework as specified by the IASB (2011) as it sets out the concepts that underlie the
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preparation and presentation of financial statements for external users. The Conceptual Framework
is the foundation on which financial reporting standards are established. The principles in standards
specify how the framework concepts apply to particular issues. The rules in standards complement
and operationalize the principles by specifying what an entity must do to satisfy those principles.
Rules reflect not only the concepts and principles, but also practical considerations and cost/benefit
trade-offs.
Bradbury and Schroder (2012) using a number of prior studies, identified characteristics of
principles-based accounting standards. They found that rules-based standards, relative to principlesbased standards, have more rules, more justification, acknowledge less judgment (if required), and
are more verbose and complex. Typically, rules-based accounting standards are perceived to be
detailed, complex, and with scope for exceptions (Nelson 2003; Schipper 2003). In contrast,
principles-based standards have scope for exercising professional judgment (Benston et al. 2006).
In addressing the opportunities to revise the accounting curriculum, Wells (2011) has
expounded Framework-based teaching that relates the concepts in the IASBs Conceptual
Framework to the particular IFRS requirements (Wells 2011, 306):
Because Framework-based teaching is rooted in the concepts that underlie IFRSs, such
teaching lays the foundations for a more robust and cohesive understanding of the
requirements in IFRSs. Because the Conceptual Framework establishes the concepts that
underlie the estimates, judgments, and models on which IFRS financial statements are
largely based; Framework-based teaching enhances the ability of students to exercise the
judgments that are necessary to apply IFRSs by relating those concepts to the particular
IFRS requirements being taught.
Using Framework-based teaching, Wells (2011), as the director of the Education Initiative,
IFRS Foundation, has developed a range of teaching resources. The next subsection outlines the
background to the IFRS Education Initiative and a case study is provided to illustrate the use of
judgment in applying principles-based standards.
IFRS Teaching Resources
Background to the IFRS Education Initiative
The Education Initiative of the IASB is actively supporting those teaching IFRS or planning to
do so, to develop in their students the ability to make the judgments and estimates that are necessary
to apply principles-based accounting standards.1 That project developed from the Education
Initiatives participation in Canadian IFRS human capacity-building projects leading up to the
adoption of IFRS in Canada.2 This, and other IASB Framework-based teaching events, led to a
paper by Michael Wells (director, IFRS Education Initiative, IASB) being included as the lead
article in a special edition of the International Journal Accounting Education that is dedicated to
teaching IFRS3 and to a webcast4 by Mary Barth (Joan E. Horngren Professor of Accounting,
Stanford University, former IASB member and now president-elect of the AAA) and Michael Wells
explaining the Framework-based approach to teaching IFRS.
1
2

3
4

IFRS requirements are principles-based only when they are consistent with the concepts set out in the IASBs
Conceptual Framework for Financial Reporting (see, Wells 2011, 304).
Chartered Accountants of Canada and University of Toronto (http://www.cica.ca/becoming-a-ca/
supporting-ca-academics/item62031.pdf ).
Wells (2011, 303316).
Available at: http://www.ifrs.org/Usearoundtheworld/Education/IFRSTeachingSessions.htm

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Those materials provide the background for the Education Initiatives current flagship
project that includes developing comprehensive IFRS teaching material for those teaching CPA/CA
stream students, focused on developing learners ability to make the judgments and estimates that
are necessary to apply IFRS. The project also includes a series of regional workshops, training
teachers in the effective use of that material.5 The first installment of the new material (including
notes for students, tutorials, and a comprehensive case study) focuses on the teaching of accounting
for assets at three stages on CPA/CA stream students progress toward qualifying. That material
was being used in a series of IFRS teaching workshops arranged by the Education Initiative around
leading academic accounting associations conferences in 2012, including the AAA and the
European Accounting Association (EAA) annual meetings.6
To a large extent, financial statements that conform to IFRS are based on estimates, judgments,
and models rather than exact depictions (IFRS Foundation 2010, para. OB11). Non-IFRS
accounting requirements are often influenced or governed by tax or central government planning
rather than by financial reporting principles designed to inform capital allocation decisions as has
been illustrated in several articles in this special section of the journal (e.g., IFRS in Russia and
Brazil). Other jurisdictions, where accounting is based on concepts similar to those that underlie
IFRS, have developed prescriptive rules and industry-specific guidance that replace the use of
judgment in applying those standards. Because IFRSs are principles-based standards designed for
use globally and across all industries, they do not include such prescriptive rules and industryspecific guidance. Applying IFRS requires the use of estimates and other judgments. Consequently,
as jurisdictions implement IFRS, many people find difficulty in making the judgments and
estimates to apply IFRS.
For example, Upton (2010) observes that when first implementing IFRS, accounting for
property, plant, and equipment (PPE) is a special challenge. The main judgments and estimates in
measuring depreciation are illustrated in example 28 shown in Appendix A, derived from the
material used by Wells and Tarca in CPE Session #39 at the 2012 AAA Annual Meeting in
Washington, DC.7
Addressing Increased Complexity in Judgments Using a Framework-Based Approach to
Teaching IFRS
The case shown in Appendix A illustrates that judgment is required in three aspects of the
determination of the depreciation of the asset: i.e., the components of depreciation, the depreciation
method, and judgment of useful life. The material developed by the IFRS Education Initiative
consistently endeavors to assist educators in developing students skills in the Framework-based
approach to principles-based IFRS. To achieve its objective, the Education Initiative makes
available an appropriate range of high-quality, understandable, and up-to-date material and services
about standard-setting and IFRS. See the website: http://www.ifrs.org/Use-around-the-world/
Education/Pages/Education.aspx
In developing materials for educators, the IFRS Education Initiative team has been mindful of
the need to gradually develop judgment skills over the duration of a course of study via the
development of case studies as an approach to skill development. For example materials developed
to date by the Education Initiative team have typically included a graduated complexity in level of
5
6
7

Available at: http://www.ifrs.org/Use-around-the-world/Education/Documents/Frameworkbasedteaching2012to2016.pdf

Available at: http://www.ifrs.org/Usearoundtheworld/Education/IFRSTeachingSessions.htm
Available at: http://www.ifrs.org/Use-around-the-world/Education/Documents/AAA%20WashingtonWorkshop%
20Handout.pdf ( pages 5053).

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judgment from a first stage in an accounting course, to a second stage, and finally a third stage
requiring the most sophisticated and complex level of judgment.
The Education Initiative team also acknowledges that IFRS is often taught without reference to
the IASB Conceptual Framework. The failure to reference the Conceptual Framework has resulted
in fragmented understanding of IFRS, which impedes the ability of students to interpret IFRS and to
make the necessary judgments. Therefore, the Education Initiative team is involved in projects that
are designed to improve skills and knowledge of accounting educators to interpret IFRS and better
prepare users to deal with changes in new and amended accounting standards. One objective is to
encourage leading IFRS teachers, IASB members, development agencies, and others to promote
Framework-based IFRS teaching including workshops and other resources (e.g., video clips,
PowerPoint presentations, and case studies). Additionally, the Education Initiative is working
toward improvements in non-English speaking versions of materials (IASB 2012b).
In summary, the provision of a range of resources through the IFRS Education Initiative is a
positive endeavor that will provide educators globally with the opportunity to more generally reassess their approaches to teaching accounting. Educators are encouraged to make use of the
resources that have been developed by the IFRS Education Initiative and whenever possible take
advantage of the CPD opportunities that are provided online and at various locations around the
world, to enhance their knowledge and understanding of the Framework-based approach to
teaching principles-based IFRS.
CONCLUSIONSTHE FUTURE OF IFRS EDUCATION
This introductory article in the special section has endeavored to emphasize what the adoption
of IFRS means for educators based on the evidence provided from eight countries as well as
approaches to teaching IFRS. The message to educators with regard to teaching IFRS is that
resources from the IFRS Education Initiative are available and specifically designed to enable
students to become more capable in exercising the judgments needed for IFRS application.
Furthermore, by including a simple example of the use of judgment in determining depreciation,
this paper has emphasized that IFRS involves a change in teaching approach to a focus on
judgment.
As Sunder (2010) states, the exercise of judgment is a hallmark of a profession. A shift from a
rules-based to principles-based standards does not cater for black and white or right or wrong
answers but it helps attract abstract thinkers to the accounting profession. Consequently, there is an
increasing need for accounting educators to shift their focus from merely transferring technical
knowledge to the development of skills and principles more appropriate to exercising judgment
given the principles-based IFRS applicable to future accounting and business practice.
There are likely to be greater demands on accounting educators globally to adapt their teaching
to incorporate a range of teaching resources that support the principles-based IFRS model. Coetzee
and Schmulian (2012) outline how a principles-based approach requires educators to adopt several
innovative methods of pedagogy to develop students judgment. Teaching methods need to
encompass simulations, role-plays, problem-based learning, cooperative-based learning, as well as
case studies with alternative solutions. As such, the accounting educators role is shifted to an
environment of student-centered pedagogy.
As outlined in the first section of this paper from the experiences of educators in eight
countries, there continues to be a need to address a number of issues particularly relating to cultural
and translation issues to achieve a consistent interpretation and application of common global
standards. Tsakumis et al. (2009) recommend that multinational corporations and global audit firms
strengthen their cultural awareness training. Similarly, accounting educators need to increase their
awareness of cultural differences and as the articles in this special section demonstrate, an
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understanding of ones own countrys cultural accounting tendencies is a starting point in achieving
a better understanding of how these values affect interpretations and judgments in a global setting.
Despite the imperfections that arise from cultural, language, and political differences, the
increasing global adoption of IFRS has provided accounting educators with a common language
of accounting that has the potential to strengthen accounting education across borders. As Barth
(2008, 1163) states:
Todays students are the future of our profession. We need to educate them for the world
they will live in, not the world we lived in. Their world is global. No single country can
stand alone in such a world, not even the U.S.

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APPENDIX A
EXAMPLE 28: DEPRECIATION
On December 31, 20X0 an entity completes the construction of a spacecraft to provide
recreational space travel. The spacecraft cost CU100 million (excluding inspection costs).
The government body that regulates space travel from the jurisdiction in which the entity
operates its spacecraft requires, as a condition of operating the spacecraft, that the spacecraft must
pass an inspection by its agents before starting commercial space travel and thereafter at two-year
intervals, irrespective of the number of flights flown by the spacecraft. In December 20X0 the first
inspection was performed at a cost to the entity of CU20 million.
Although the entity is not obliged to do so, the entity intends to replace the soft furnishings in the
spacecraft after 50 flights have been made by the spacecraft. The cost attributable to the soft furnishings
is about CU100,000. The entity does not expect to replace any other components of the spacecraft.
The entity intends to use the spacecraft for its entire economic life. The spacecraft is designed
with the capacity to make 150 flights into outer space. However, aviation regulations require that
the spacecraft be decommissioned at the earlier of completing its 100th flight into outer space or
five years from the date of its construction.
Although the entity expects that it could sell the spacecraft for about CU10 million at the end of
its economic life, to prevent its competitors from gaining access to the unique technology embodied
in the spacecraft, the entity intends instead to destroy the spacecraft. Management estimate the costs
of destroying the spacecraft at about CU1 million.
Management expects that income per voyage will decline significantly each year as the novelty
of recreational space travel declines. The premium paid by earlier travelers is so significant that total
revenue is forecast to halve each year.
Management forecast that the spacecraft will make 5 voyages in 20X1, 15 in 20X2, 20 in
20X3, and 60 in 20X4 and will be decommissioned on December 31, 20X4.
Judgment: Residual Value of the Spacecraft
On December 31, 20X0 management must estimate the residual value of the assets at the
estimated amount that an entity would obtain on December 31, 20X0 from disposal of the asset,
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after deducting the estimated costs of disposal, if the asset were already of the age and in the
condition expected at the end of its useful life (see paragraph 6 of IAS 16). That measurement is
different from the CU10 million that the entity expects that it could sell the spacecraft for at the end
of its economic lifeexpectations of future changes in residual value other than the effects of
expected wear and tear do not affect the depreciable amount (see, paragraph BC29 of the Basis for
Conclusions on IAS 16).
Note: Consistent with the underlying economics, managements intention to destroy the asset is
not relevant to the measurement of the spacecrafts residual value. In other words, the destruction of
the spacecraft is an impairment loss (expense) in the period in which it is destroyed.
Judgment: Component Depreciation
Because the inspection component is significant in relation to the total cost of the spacecraft
(i.e., CU20 million out of CU120 million), the inspection component must be depreciated
separately from the other components of the spacecraft. Furthermore, the useful life (two years),
residual value (nil), and depreciation method (straight-line) of the inspection component of the
spacecraft are also materially different from the other components.
Note: because the soft-furnishings component of the spacecraft is not significant in relation to
the cost of the spacecraft (i.e., CU100, 000 out of CU120 million), the soft-furnishings component
need not be depreciated separately from the other components of the spacecraft.
Judgment: Depreciation Method
The most appropriate depreciation method is the unit of production method (i.e., the number
of voyages expected to be obtained from the spacecraft by an entity). That method of depreciation
most closely reflects the expected pattern of consumption of the future economic benefits embodied
in the asset because each voyage is expected to consume one-hundredth of the service potential of
the spacecraft.
However, because the service potential of the inspection component of the spacecraft is
consumed on the basis of time alone (e.g., it is unaffected by the number of flights that the
spacecraft makes), the inspection component only would be depreciated on the straight-line
method.
Note: although the entity expects to earn in 20X1 more than half (i.e., 53.333 percent or 8/15)8
of the total income that the spacecraft is expected to generate over its useful life (because total
revenue generated from using the spacecraft is expected to halve each year), the entity cannot
recognize a corresponding proportion of the assets cost as depreciation expense in 20X1 (i.e., the
entity cannot use revenue-based depreciation).
Judgment: Useful Life
Because the most appropriate depreciation method is the units of production method (see
above), measured from December 20X0 the useful life of the spacecraft would be 100 voyages (i.e.,
the number of voyages the entity expects to be obtained from the spacecraft). Each voyage is
expected to consume one-hundredth of the service potential of the spacecraft.

8: 4: 2: 1 (i.e., a total of 15) reflects the pattern of revenue halving in each year over a four-year period (the
expected period over which the entity expects to use the spacecraft). Consequently, 8/15 reflects the proportion of
total income that is expected to be earned in 20X1.

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