Abstracts Track 2022

Area 1 - Accounting and Finance

Nr: 3

Impacts on the Decision Making Process of “recognising” versus “disclosing” the Information in Financial Reporting


Fabio Albuquerque and Manuela Marcelino

Abstract: This study uses the requirement from a subsequent measurement model prescribed in the International Accounting Standards (IAS) 40 Investment Properties as a means of assessing the impacts from the place in which the information is reported. Particularly, it aims to assess the differences between the information provided in the income statement (“recognition”) versus in the notes (“disclosure”) regarding the users' decision-making in investment decisions. Four phases of the cognitive process were considered, namely: acquisition, analysis, weighting, and judgment. Two questionnaires, representative of two distinct groups (“recognition group” vs. “disclosure group”), were distributed to masters' students at Lisbon Accounting and Business School (ISCAL). The final sample consisted of 73 responses, 36 of which related to the “recognition group”. Nonparametric statistical techniques were applied, namely Chi-square and Mann-Whitney-U tests. The findings indicated the existence of significant differences in three of the four phases under analysis, namely in the phases of acquisition, weighting, and judgment, suggesting the existence of the effects of functional fixation in Portugal. Then, the effects of functional fixation should not be neglected by standard-setters bodies in the process of issuing accounting and financial reporting standards, which is one of the main contributions of this research. As limitations, it should be noted that the research was conducted to students exclusively inserted in the Polytechnic of Lisbon. Therefore, it cannot be assured that similar results would have been obtained if the study were applied exclusively to a class of professionals or users, namely Chartered Accountants or professional investors. The value of this research comes from the fact that financial information should be useful for decision-making. However, the way information is presented in the financial report, including its location, can influence the decision maker's behavior in the context of decision making, considering the impact of functional fixation on this process. This study is the first known replica of such a study in Portugal.