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The meaning of cash in the context of alternative accounting standards IFRS convergence and classification decisions

The meaning of cash in the context of alternative accounting standards IFRS convergence and... Purpose – The purpose of this paper is to explore the impact on communication of changes in an accounting standard arising from the transition to International Financial Reporting Standards. It investigates inter and intragroup differences in measured connotative meaning of the old and new definitions of “cash”, as held by three key groups of parties to the accounting communication process (preparers, auditors and users); and determines the effect of changes in connotative meaning on decision behaviour (outcomes). Design/methodology/approach – The study adopted a between‐participants 2×3 factorial design whereby the first factor reflected the definition type: old vs new definition of the concept “cash”; while the second reflected three financial reporting groups: preparers, auditors and users. The semantic differential technique developed by Osgood, Suci and Tannenbaum was used to measure connotative meaning. Findings – The study finds that the three financial reporting groups do not share the same meaning of the concept “cash” and that the introduction of the new definition has changed the interpreted connotative meaning for these three groups. A link between measured meaning and the decisions made by the participants was also established. Research limitations/implications – The explanatory power of the typical three (evaluative, potency and activity) factor structure should be acknowledged; these factors typically explain 50 per cent of the total phenomena known as “meaning”. The study's findings make an important contribution to the earnings management and creative accounting literature. Practical implications – The findings are particularly relevant to standard‐setters and regulators as a lack of shared meaning may lead to unnecessary misunderstandings and tensions among the many parties to the reporting process. Originality/value – The study extends prior measurement of meaning studies in accounting through first, the inclusion of all three major groups of parties to the accounting communication process; second, examination of an accounting concept which is defined differently by two accounting standards in the same jurisdiction; and last, investigation of the impact on decision behaviour (outcomes) resulting from changes in meaning brought about through the introduction of a new standard across the three groups. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Accounting Research Journal Emerald Publishing

The meaning of cash in the context of alternative accounting standards IFRS convergence and classification decisions

Tony Mortensen; Richard Fisher
Accounting Research Journal , Volume 24 (1): 27 – Jul 19, 2011
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Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
1030-9616
DOI
10.1108/10309611111148760
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to explore the impact on communication of changes in an accounting standard arising from the transition to International Financial Reporting Standards. It investigates inter and intragroup differences in measured connotative meaning of the old and new definitions of “cash”, as held by three key groups of parties to the accounting communication process (preparers, auditors and users); and determines the effect of changes in connotative meaning on decision behaviour (outcomes). Design/methodology/approach – The study adopted a between‐participants 2×3 factorial design whereby the first factor reflected the definition type: old vs new definition of the concept “cash”; while the second reflected three financial reporting groups: preparers, auditors and users. The semantic differential technique developed by Osgood, Suci and Tannenbaum was used to measure connotative meaning. Findings – The study finds that the three financial reporting groups do not share the same meaning of the concept “cash” and that the introduction of the new definition has changed the interpreted connotative meaning for these three groups. A link between measured meaning and the decisions made by the participants was also established. Research limitations/implications – The explanatory power of the typical three (evaluative, potency and activity) factor structure should be acknowledged; these factors typically explain 50 per cent of the total phenomena known as “meaning”. The study's findings make an important contribution to the earnings management and creative accounting literature. Practical implications – The findings are particularly relevant to standard‐setters and regulators as a lack of shared meaning may lead to unnecessary misunderstandings and tensions among the many parties to the reporting process. Originality/value – The study extends prior measurement of meaning studies in accounting through first, the inclusion of all three major groups of parties to the accounting communication process; second, examination of an accounting concept which is defined differently by two accounting standards in the same jurisdiction; and last, investigation of the impact on decision behaviour (outcomes) resulting from changes in meaning brought about through the introduction of a new standard across the three groups.

Journal

Accounting Research Journal – Emerald Publishing

Published: Jul 19, 2011

Keywords: International accounting standards; Cash flow statement; Connotative meaning; Measurement of meaning; Semantic differential; Cash; Financial reporting

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