To read the full version of this content please select one of the options below:

An experimental investigation of dimensional precision in uncertainty disclosures related to revenue recognition

Ning Du (School of Accountancy and MIS, DePaul University, Chicago, Illinois, USA)
Ray Whittington (School of Accountancy and MIS, DePaul University, Chicago, Illinois, USA)

Accounting Research Journal

ISSN: 1030-9616

Article publication date: 8 May 2018

Abstract

Purpose

The purpose of this paper is to investigate how managerial disclosure of imprecise information about revenue recognition affects investors’ perceptions of corporate and management performance. Specifically, the authors focus on how outcome and probability dimensions and their respective (im) precision interact with each other and jointly affect investors’ judgments and decision-making.

Design/methodology/approach

The authors conducted an experiment where the dimensions are manipulated (outcome vs probability) of disclosed revenue recognition information and its related precision (a point vs a range estimate).

Findings

Results from this study suggest that participants are sensitive to specific dimensions of uncertainty disclosure: participants were highly aware of the (im)precision in outcome information, were more likely to invest when both dimensions were vague and expected higher revenue when dimensional precision was consistent.

Practical implications

The results imply that dimensional precision is an important component in uncertainty disclosure and may have a significant impact on investors’ judgments and decision making. Regulators and managers should consider dimensional imprecision when they develop and implement disclosure strategy regarding revenue recognition.

Social implications

The results have practical value for regulators/managers, who are in the process of developing/implementing disclosure strategy regarding revenue recognition.

Originality/value

This is the first study to examine the interaction of dimensions of uncertainty in revenue disclosures.

Keywords

Citation

Du, N. and Whittington, R. (2018), "An experimental investigation of dimensional precision in uncertainty disclosures related to revenue recognition", Accounting Research Journal, Vol. 31 No. 1, pp. 90-101. https://doi.org/10.1108/ARJ-12-2016-0150

Publisher

:

Emerald Publishing Limited

Copyright © 2018, Emerald Publishing Limited