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Forecasting confidence under segment reporting

Forecasting confidence under segment reporting Purpose – Changes in Australian segment reporting standards over the last decade changed the required disaggregation of segment information. The purpose of this paper is to investigate whether increased disaggregation has implications for users' confidence in decisions based on segment reports and perceptions of segment reporting usefulness. Design/methodology/approach – Using an experiment based on the differences between the original AASB 1005 and the more detailed requirements of AASB 114, the authors test whether segment report users' confidence in forecasting and their perceptions of segment report usefulness differ between the different information sets provided under these standards. Findings – It was found that the more disaggregated or finer reports based on AASB 114 provide significantly more confidence to users, compared to the coarser segment reports based on the original AASB 1005, but this is not associated with differences in segment report usefulness scores. Research limitations/implications – The authors' experiment is based on AASB 1005 and AASB 114 and the results cannot be generalized to differences with other reporting standards. Examination of differences in recently released AASB 8 may reveal different implications for users' confidence and perceptions of usefulness. More generally, other tests of usefulness are needed to confirm whether opinions of usefulness that are not confirmed by decision‐making practices provide a reliable basis for determining usefulness. Practical implications – By confirming that decision makers' confidence can be increased by the provision of finer information sets, the authors' results have practical implications for accounting standard setting. Originality/value – By testing the impact of report differences on user decision confidence, the paper addresses a previously overlooked issue. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Accounting Research Journal Emerald Publishing

Forecasting confidence under segment reporting

Jacqueline Birt; Greg Shailer
Accounting Research Journal , Volume 24 (3): 23 – Nov 22, 2011
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23 pages

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Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
1030-9616
DOI
10.1108/10309611111186993
Publisher site
See Article on Publisher Site

Abstract

Purpose – Changes in Australian segment reporting standards over the last decade changed the required disaggregation of segment information. The purpose of this paper is to investigate whether increased disaggregation has implications for users' confidence in decisions based on segment reports and perceptions of segment reporting usefulness. Design/methodology/approach – Using an experiment based on the differences between the original AASB 1005 and the more detailed requirements of AASB 114, the authors test whether segment report users' confidence in forecasting and their perceptions of segment report usefulness differ between the different information sets provided under these standards. Findings – It was found that the more disaggregated or finer reports based on AASB 114 provide significantly more confidence to users, compared to the coarser segment reports based on the original AASB 1005, but this is not associated with differences in segment report usefulness scores. Research limitations/implications – The authors' experiment is based on AASB 1005 and AASB 114 and the results cannot be generalized to differences with other reporting standards. Examination of differences in recently released AASB 8 may reveal different implications for users' confidence and perceptions of usefulness. More generally, other tests of usefulness are needed to confirm whether opinions of usefulness that are not confirmed by decision‐making practices provide a reliable basis for determining usefulness. Practical implications – By confirming that decision makers' confidence can be increased by the provision of finer information sets, the authors' results have practical implications for accounting standard setting. Originality/value – By testing the impact of report differences on user decision confidence, the paper addresses a previously overlooked issue.

Journal

Accounting Research Journal – Emerald Publishing

Published: Nov 22, 2011

Keywords: Australia; Accounting standards; Profit forecasting; Segment reporting; Fineness theorem; Analysts; Experiment; Value relevance

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