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

Tony Mortensen (University of Canterbury, Christchurch, New Zealand)
Richard Fisher (University of Canterbury, Christchurch, New Zealand)

Accounting Research Journal

ISSN: 1030-9616

Article publication date: 19 July 2011




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).


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.


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.


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.



Mortensen, T. and Fisher, R. (2011), "The meaning of cash in the context of alternative accounting standards: IFRS convergence and classification decisions", Accounting Research Journal, Vol. 24 No. 1, pp. 23-49.



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