Identifying Decision Useful Information with the Matrix Format Income Statement

34 Pages Posted: 6 May 2008

See all articles by Ann Tarca

Ann Tarca

University of Western Australia

David R. Woodliff

University of Western Australia

Phil Hancock

University of Western Australia

Philip R. Brown

UWA Business School, M250; Financial Research Network (FIRN)

Michael E. Bradbury

Massey University

Tony van Zijl

Victoria University of Wellington - Faculty of Commerce and Administration

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Abstract

We conduct an experiment to investigate the potential benefits of an alternative format for the income statement, the matrix format, initially developed by the International Accounting Standards Board (IASB) and UK Accounting Standards Board in their joint project on performance reporting. Sophisticated financial statement users (financial analysts and professional accountants) and less sophisticated financial statement users (MBA students) were asked to extract information from a set of financial statements that included an income statement either in the IAS 1 format or in the matrix format. We find that the matrix format improves the accuracy with which users extract financial information. This result is driven by greater accuracy, for all user groups, on below-the-line items. Furthermore, despite lack of familiarity with the matrix format, its use did not appear to affect the time taken, the ease of extracting financial information, or users' task completion confidence; further experience with the matrix format could lead to benefits along these lines as well. Our findings may assist the FASB and IASB in their joint project on financial statement presentation.

JEL Classification: M41, M44, C90

Suggested Citation

Tarca, Ann and Woodliff, David R. and Hancock, Phil and Brown, Philip R. and Bradbury, Michael E. and van Zijl, Tony, Identifying Decision Useful Information with the Matrix Format Income Statement. Journal of International Financial Management & Accounting, Vol. 19, No. 2, pp. 184-217, Summer 2008. Available at SSRN: https://ssrn.com/abstract=1129547 or http://dx.doi.org/10.1111/j.1467-646X.2008.01021.x

Ann Tarca (Contact Author)

University of Western Australia ( email )

Business School
35 Stirling Highway
Crawley WA 6009
Australia
+61 8 6488 3868 (Phone)
+61 8 6488 1047 (Fax)

David R. Woodliff

University of Western Australia ( email )

Department of Accounting & Finance
Nedlands WA 6907
AUSTRALIA

Phil Hancock

University of Western Australia ( email )

Graduate School of Management
35 Stirling Highway
Crawley WA 6009
Australia
61 8 938029129 (Phone)
61 8 9380 1072 (Fax)

Philip R. Brown

UWA Business School, M250 ( email )

Crawley, Western Australia 6009
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Michael E. Bradbury

Massey University ( email )

School of Accountancy
Private Bag 102 904
Auckland
New Zealand
64 9 414 0800 (Phone)
64 9 441 8133 (Fax)

Tony Van Zijl

Victoria University of Wellington - Faculty of Commerce and Administration ( email )

RH 606, Pipitea Campus, 6th Floor, Rutherford Hous
23 Lambton Quay
Wellington
Australia

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