The effect of more rules‐based guidance on expense disclosure under International Financial Reporting Standards

International Financial Reporting Standards ( IFRS ) are often described as principles‐based; however, we show that IFRS and Australian pre‐ IFRS expense‐related standards are more rules‐based than pre‐ IFRS expense disclosure in New Zealand. Thus, we examine expense disclosure in New Zealand and Australia around IFRS adoption to provide evidence on the effect of more or less rules‐based standards on voluntary disclosure. First, we add to the rules versus principles‐based standards debate by finding higher voluntary expense disclosure under more rules‐based standards (e.g. IFRS ). This contrasts with expectations, as we would expect fewer voluntary disclosures under more rules‐based standards as there would be fewer possible voluntary disclosures. Second, we document that New Zealand firms have significantly less voluntary expense disclosure than size‐ and industry‐matched Australian firms in both the pre‐ and post‐ IFRS period. However, all measures of expense disclosure significantly improved post‐ IFRS for New Zealand, whilst little change occurred for Australian firms. Thus, there is greater financial statement comparability across these countries post‐ IFRS , but not full harmonization. Third, we show that the relationship between most firm characteristics and expense disclosure is weaker post‐ IFRS . In addition, cross‐listed firms and loss‐making firms have a higher level of expense disclosure, as contrasted with firms in the investment and property industry which have a lower percentage of unspecified expenses but also report fewer voluntary expenses.