International Financial Reporting Standards (IFRS) Without an International Financial Reporting Language (IFRL) : Evidence of Information Asymmetry in the EU

Since 2005, companies in the European Union (EU) are required by Regulation 1606/2002 to prepare financial statements in accordance with IFRS; however, these listed companies are not required to prepare financial statements and disclosures in an International Financial Reporting Language (IFRL) or lingua franca. We question whether firms that file IFRS financial statements only in the local language but not in English, the IFRL or lingua franca, limit the benefits of IFRS; whereas, companies that also file in English reduce information asymmetry and increase the effectiveness of IFRS as a global informational tool. This paper examines annual filings from 6,000 listed companies in the European Union (EU) for the years 2009 and 2012. We found that approximately 60 percent of companies from non-English speaking countries file in their local language and voluntary disclose in English; while 40 percent report only in their native languages, Our research suggests that until international companies adopt English as the International Financial Reporting Language (IFRL) the full benefit of complying with IFRS will not be recognized