The Influence of Changed Accouting Language on the Interpretation of Intangible Assets and Financial Reality : SaaS Arrangements in the Light of New IFRIC Decisions

Abstract: Background/Problem: As languages are powerful tools of communication, they play a vitalrole in shaping our perception of reality, influence our understanding of the world and determine how we interpret and make sense of it. Thus, changing the accounting languagealso affects the way financial reality can be expressed, interpreted, and perceived. However, the interpretive nature of language forms various problems connected to its components. Intangible assets (IAs) have long been an ever-difficult defined concept within the accounting language, leaving room for preparers and users of financial accounting to form individual interpretations of the concept and financial reality. Regulatory changes created to clarify these difficult defined concepts within the accounting language, such as IAs, change the accounting language, and may thus affect the interpretation of the concept as well as financial reality. It is therefore of interest to understand how these interpretations of IAs and financial reality are affected by a regulatory change. Research on this area has been left unexplored to our knowledge. Instead, previous research has been performed on the various components of the area, such as IAs and the accounting language in themselves, but does not appear to have been examined together. Additionally, previous research fails to connect the issue of interpretations with how the interpretations are affected through a regulatory change and ultimately influences our understanding of financial reality. Therefore, this thesis aims to fill this research gap and provide an understanding of how interpretations are made, along with an explanation of how interpretations are affected through accounting language change and how it affects our understanding of financial reality. This is done by examining the effects of a regulatory change on users and preparers’ interpretation of IA. The regulatory change consists of two IFRIC decisions concerning the accounting of SaaS arrangements. Purpose: The purpose of this thesis is to examine how changes in the accounting languagecaused by a regulatory change affects the interpretation of IAs for preparers and users offinancial accounting, which in turn can provide an understanding of how changes in theaccounting language affect the interpretation of financial reality. Method: A qualitative method was used to examine the topic of this thesis. The empirical data were gathered through semi-structured interviews and further analyzed through ethnographic content analysis (ECA). Data were collected from 9 respondents with either programmer, auditor, investor, investment adviser, business adviser, or preparer of financial accounting as an organizational role. Main results: Users and preparers make general interpretations in different manners, interpretations concerning financial reality. Preparers who work closely with accounting regulation base their interpretations on the regulatory pillar as the institutional logics of the corresponding profession guide their decisions and actions. While users that work further from the accounting regulation do not share the institutional logics of the preparers, insteadbase their interpretations on the cultural-cognitive pillar. These differences are connected tothe normative pillar as the institutional logics of their corresponding professions shape the interpretations of financial reality. Interpretations are thus made in accordance with the normative pillar and institutional logics of each profession with either the regulatory or the cultural-cognitive pillar as the main emphasis.