The Rashomon Effect in Financial Reporting: Exploring Multi-Interpretation Financial Accounting Standards’ Phenomenon

Gatot Hidayat, Marko S. Hermawan

Abstract


This study delves into the phenomenon of multiinterpretation in financial reporting, using Garuda Indonesia’s 2018 annual financial statements as a case study, inspired by the Rashomon Effect—an approach that highlights how a single event can be interpreted differently by different parties. We conducted in-depth interviews with auditors, academicians, regulators, and users, employing qualitative research and study techniques. Our study uncovers parallels to the Rashomon Effect, as each stakeholder group presents distinct viewpoints on a financial transaction. Auditors emphasize compliance and the need for clearer guidelines, while academicians point to subjectivity within principle-based accounting; regulators voice concerns about misinterpretation and advocate standardized accounting rules, and users seek transparency for informed decision-making. The adoption of principle-based accounting standards is identified as the core driver of these interpretative disparities. Implications stress the importance of ongoing collaboration among stakeholders to enhance accounting literacy and tackle multi-interpretation issues. Addressing the limitations of principle-based standards and applying a shared understanding are crucial to improving the reliability of financial reporting. This research contributes by applying the Rashomon Effect framework to financial reporting, offering holistic insights from auditors, academicians, regulators, and users, while proposing a potential transition from principlebased to rule-based standards as a solution to mitigate multiinterpretation issues.


Keywords


Rashomon Effect; Multi Interpretation; Financial Statements; Financial Reporting; Perception.

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DOI: https://doi.org/10.17509/jaset.v17i2.93179

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