The impact of differences in ambiguity tolerance on accounting standard interpretation: implications and responses

Motivated by both the pervasiveness of ambiguity in accounting and the desire to achieve comparability in financial reporting, this study investigates the relationship between different levels of ambiguity tolerance, provisions of accounting standards that might reduce ambiguity and accounting judgements. We propose that different levels of ambiguity tolerance lead to different judgements being made in the face of similar circumstances. We further propose, contrary to what might be expected, that the provision of guidance in accounting standards will exacerbate the differences in judgement rather than reduce them. While we find only weak support for the belief that different levels of ambiguity tolerance will lead to different judgements, the provision of guidance differentially affected the judgements made by those exhibiting high versus low levels of ambiguity tolerance. Our results suggest that comparability may be best served by not providing guidance relating to ambiguous accounting standard requirements.