Forecasting confidence under segment reporting

Jacqueline Birt (Department of Accounting & Finance, Monash University, Caufield East, Australia)
Greg Shailer (School of Accounting & Business Information Systems, The Australian National University, Canberra, Australia)

Accounting Research Journal

ISSN: 1030-9616

Publication date: 22 November 2011

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.

Keywords

Citation

Birt, J. and Shailer, G. (2011), "Forecasting confidence under segment reporting", Accounting Research Journal, Vol. 24 No. 3, pp. 245-267. https://doi.org/10.1108/10309611111186993

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Publisher

:

Emerald Group Publishing Limited

Copyright © 2011, Emerald Group Publishing Limited

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