Effect of Revising the Structure of Core Financial Statements on Its User's Perception Using Eye Tracking Data
Subject Areas : Financial and Behavioral Researches in Accountingmohamad hosein vadiee 1 , reza hesarzadeh 2 , farhad nasimtoosi 3
1 - Department of Accounting, Ferdowsi University of Mashhad, Mashhad, Iran
2 - Department of Accounting, Ferdowsi University of Mashhad, Mashhad, Iran
3 - PhD Student in Accounting, Ferdowsi University of Mashhad, Mashhad, Iran.
Keywords: Financial Statements Revision, Eye Tracking, Cognitive Load, Perceptual Fluency, Depth of Processing,
Abstract :
Background and Purpose: This study explores the field of behavioral accounting, aligning with its primary objective: to understand, explain, and predict human behavior in accounting contexts. The research focuses on assessing the impact of revisions in the format of financial statements on various aspects of user perception, including cognitive load, cognitive ease, and depth of processing.
Methodology: Eye movement is closely linked to cognitive functions such as perception, attention, and memory. This relationship is well-established, as eye movements provide a precise and straightforward method for studying how information is extracted from the visual environment. In this study, we employed an eye-tracking tool to monitor the gaze patterns of participants as they reviewed financial statements. Specifically, we recorded the eye coordinates of 61 participants (comprising both accountants and auditors) while they evaluated financial statements presented in four different formats (expert/non-expert × old/new format). The eye-tracking data were captured at a frequency of 33 Hz using a user interface designed in C#. These data were then analyzed using OGAMA software, and the resulting variables were subjected to linear regression analysis.
Findings: This study's findings reveal that revisions in the format of financial statements significantly reduced cognitive load, enhanced cognitive ease, and deepened processing for the participants. Additionally, the sequence in which core financial statements were presented influenced users' cognitive processes. Participants experienced higher cognitive load and lower cognitive ease when reviewing the initial financial statement.
Discussion: Bertin's theory, which emphasizes the process of extracting "informational cues" from the format of information presentation to answer questions, posits that decision-making performance is influenced by three factors: the "set of information provided," the "question to be answered," and the "format of information presentation." In this study, the format of the information presentation varied across participant groups. As a result, the observed improvements in psycho-cognitive variables can be attributed to enhancements in the presentation format. These improvements likely stem from reduced white space, fewer columns, and a more structured report format. Additionally, cognitive fit theory suggests that humans are limited processors, and any mismatch between information format and processing requirements increases task complexity, making it more challenging. Thus, the revised financial statements appear to align more closely with the cognitive processing needs of the human mind. Furthermore, the study's results indicate that "cognitive load," "cognitive ease," and "depth of processing" are influenced by the order of information presentation, which may be due to the mind's natural tendency to focus more on initial information or the effects of cognitive fatigue.
Ahmed, A. S., Neel, M., & Wang, D. (2013). Does Mandatory Adoption of IFRS Improve Accounting Quality? Preliminary Evidence [https://doi.org/10.1111/j.1911-3846.2012.01193.x]. Contemporary Accounting Research, 30(4), 1344-1372.
Ashby, N. J. S., Johnson, J. G., Krajbich, I., & Wedel, M. (2016). Applications and Innovations of Eye-movement Research in Judgment and Decision Making [https://doi.org/10.1002/bdm.1956]. Journal of Behavioral Decision Making, 29(2-3), 96-102.
Baldi, R. (2017). Decision making and Neuroaccounting perspective: An Eye-tracking investigation on Accounting information disclosure, University of Siena. Siena.
Barth, M. E., Landsman, W. R., & Lang, M. H. (2008). International Accounting Standards and Accounting Quality [https://doi.org/10.1111/j.1475-679X.2008.00287.x]. Journal of Accounting Research, 46(3), 467-498.
Bartov, E., Goldberg, S., & Kim, M. (2005). Comparative Value Relevance Among German, U.S., and International Accounting Standards: A German Stock Market Perspective. Journal of Accounting, Auditing & Finance, 20, 95-119.https://doi.org/10.1177/0148558X0502000201
Baskerville, R., & Rhys, H. (2014). A Research Note on Understandability, Readability and Translatability of IFRS. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2528118
Benyasrisawat, P. (2011). Earnings persistence, value relevance, and earnings timeliness : the case of Thailand.
Bergstrom, J., & Schall, A. (2014). Eye Tracking in User Experience Design (1st edition ed.). Morgan Kaufmann.
Bertin, J. (1983). Semiology of graphics. University of Wisconsin Press.
Bertola, M. A., & Balk, S. A. (2011). Eyes on the Road: A Methodology for Analyzing Complex Eye Tracking Data. Proceedings of the 19th Annual Southeast SAS Users Group (SESUG)(Alexandria, VA).
Bilgic, F. A., & Ibis, C. (2013). Effects of new financial reporting standards on value relevance : a study about Turkish stock markets [Aufsatz in Zeitschrift, Article in journal]. International Journal of Economics and Finance, 5(10, (10)), 126-140.
Bruneau, D., Sasse, A., & McCarthy, J. (2002). The Eyes Never Lie: The Use of Eye Tracking Data in HCI Research.
Chen, H., Tang, Q., Jiang, Y., & Lin, Z. (2010). The Role of International Financial Reporting Standards in Accounting Quality: Evidence from the European Union [https://doi.org/10.1111/j.1467-646X.2010.01041.x]. Journal of International Financial Management & Accounting, 21(3), 220-278.
Cheung, E., & Lau, J. (2016). Readability of Notes to the Financial Statements and the Adoption of IFRS [https://doi.org/10.1111/auar.12087]. Australian Accounting Review, 26(2), 162-176.
Chua, Y. L., Cheong, C. S., & Gould, G. (2012). The Impact of Mandatory IFRS Adoption on Accounting Quality: Evidence from Australia. Journal of International Accounting Research, 11(1), 119-146. https://doi.org/10.2308/jiar-10212
Cohen, J. R., Holder-Webb, L., & Zamora, V. L. (2015). Nonfinancial Information Preferences of Professional Investors. Behavioral Research in Accounting, 27(2), 127-153. https://doi.org/10.2308/bria-51185
Committee on the Relationship of Behavioral Science and Accounting (1974). Report of the Committee on the Relationship of Behavioral Science and Accounting. The Accounting Review, 49, 127-139. http://www.jstor.org/stable/244907
Coury, B. G., & Boulette, M. D. (1992). Time Stress and the Processing of Visual Displays. Human Factors, 34(6), 707-725. https://doi.org/10.1177/001872089203400605
Damle, A., & Smith, P. (2009). Biasing cognitive processes during design: the effects of color. Design Studies - DESIGN STUD, 30, 521-540. https://doi.org/10.1016/j.destud.2009.01.001
Debue, N., & van de Leemput, C. (2014). What does germane load mean? An empirical contribution to the cognitive load theory. Front Psychol, 5, 1099. https://doi.org/10.3389/fpsyg.2014.01099
Deegan, C., & Unerman, J. (2011). Financial Accounting Theory: European Edition.
DEFOND, M. L., HANN, R. N., & HU, X. (2005). Does the Market Value Financial Expertise on Audit Committees of Boards of Directors? Journal of Accounting Research, 43(2), 153-193. https://doi.org/10.1111/j.1475-679x.2005.00166.x
Dickson, G. W., DeSanctis, G., & McBride, D. J. (1986). Understanding the effectiveness of computer graphics for decision support: a cumulative experimental approach. Commun. ACM, 29(1), 40–47. https://doi.org/10.1145/5465.5469
Dull, R. B., Graham, A. W., & Baldwin, A. A. (2003). Web-based financial statements: hypertext links to footnotes and their effect on decisions. International Journal of Accounting Information Systems, 4(3), 185-203. https://doi.org/10.1016/S1467-0895(03)00009-5
Eccher, E., & Healy, P. (2000). The Role of International Accounting Standards in Transitional Economies: A Study of the People's Republic of China. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.233598
EyeTracking. (2018). We're Gonna Need a Bigger Sample. Retrieved 24/08/2022 from http://www.eyetracking.com/News/EyeTracking-Blog/EntryId/58/We-re-GonnaNeed-a-Bigger-Sample
Ezugwu, A. E., Shukla, A. K., Agbaje, M. B., Oyelade, O. N., José-García, A., & Agushaka, J. O. (2021). Automatic clustering algorithms: a systematic review and bibliometric analysis of relevant literature. Neural Computing and Applications, 33(11), 6247-6306. https://doi.org/10.1007/s00521-020-05395-4
Ghani, E., Laswad, F., Tooley, S., & Jusoff, K. (2009). The role of presentation format on decision-makers' behaviour in accounting. International Business Research, 2(1), 183-195.
Gidlöf, K., Holmberg, N., & Sandberg, H. (2012). The use of eye-tracking and retrospective interviews to study teenagers’ exposure to online advertising. Visual Communication, 11. https://doi.org/10.1177/1470357212446412
Glaholt, M. G., & Reingold, E. M. (2011). Eye movement monitoring as a process tracing methodology in decision making research. Journal of Neuroscience, Psychology, and Economics, 4(2), 125.
Goodwin, J., Ahmed, K., & Heaney, R. (2008). The Effects of International Financial Reporting Standards on the Accounts and Accounting Quality of Australian Firms: A Retrospective Study. Journal of Contemporary Accounting & Economics, 4, 89-119. https://doi.org/10.1016/S1815-5669(10)70031-X
Holmqvist, K., Nyström, M., Andersson, R., Dewhurst, R., Halszka, J., & van de Weijer, J. (2011). Eye Tracking : A Comprehensive Guide to Methods and Measures [Book]. Oxford University Press.
Hopwood, A. G. (1996). Looking across rather than up and down: On the need to explore the lateral processing of information. Accounting, Organizations and Society, 21(6), 589-590. https://EconPapers.repec.org/RePEc:eee:aosoci:v:21:y:1996:i:6:p:589-590
Hung, M., & Subramanyam, K. R. (2007). Financial Statement Effects of Adopting International Accounting Standards: The Case of Germany. Review of Accounting Studies, 12, 623-657. https://doi.org/10.1007/s11142-007-9049-9
Jun Lin, Z., & Chen, F. (2005). Value relevance of international accounting standards harmonization: Evidence from A- and B-share markets in China. Journal of International Accounting, Auditing and Taxation, 14(2), 79-103. https://doi.org/10.1016/j.intaccaudtax.2005.08.001
Just, M. A., & Carpenter, P. A. (1980). A theory of reading: From eye fixations to comprehension. Psychological Review, 87(4), 329-354. https://doi.org/10.1037/0033-295X.87.4.329
Kadri, M., Ibrahim, M., & Abdul Aziz, R. (2009). Value Relevance of Book Value and Earnings: Evidence from Two Different Financial Reporting Regimes. Journal of Financial Reporting and Accounting, 7. https://doi.org/10.1108/19852510980000638
Karampinis, N., & Hevas, D. (2009). The Effect of the Mandatory Application of IFRS on the Value Relevance of Accounting Data: Some Evidence from Greece. , European Research Studies Journal, XII(1), 73-100.
Kargin, S. (2013). The Impact of IFRS on the Value Relevance of Accounting Information: Evidence from Turkish Firms. International Journal of Economics and Finance, 5. https://doi.org/10.5539/ijef.v5n4p71
Kershaw, R., & Tuttle, B. M. (1998). Information Presentation and Judgment Strategy from a Cognitive Fit Perspective.
Krishnan, J., & Lee, J. E. (2009). Audit Committee Financial Expertise, Litigation Risk, and Corporate Governance. AUDITING: A Journal of Practice & Theory, 28(1), 241-261. https://doi.org/10.2308/aud.2009.28.1.241
Kuo, F.-Y., Hsu, C.-W., & Day, R.-F. (2009). An exploratory study of cognitive effort involved in decision under Framing—an application of the eye-tracking technology. Decision Support Systems, 48(1), 81-91. https://doi.org/10.1016/j.dss.2009.06.011
Kwon, S. Y., Lim, J.-H., & Park, J. (2024). CFO Accounting Expertise and SEC Comment Letter Process. Journal of Accounting, Auditing & Finance, 0148558X231215912.
Liu, J., & Liu, C. (2007). Value Relevance of Accounting Information in Different Stock Market Segments: The Case of Chinese A-, B, and H-Shares. Journal of International Accounting Research - J Int Account Res, 6, 55-81. https://doi.org/10.2308/jiar.2007.6.2.55
Macefield, R. (2009). How to specify the participant group size for usability studies: a practitioner's guide. Journal of Usability Studies, 5(1), 34-45.
Maines, L. A. (1995). Judgment and decision-making research in financial accounting: A review and analysis. In A. H. Ashton & R. H. Ashton (Eds.), Judgment and Decision-Making Research in Accounting and Auditing (pp. 76-101). Cambridge University Press.
Meißner, M., & Oll, J. (2017). The Promise of Eye-Tracking Methodology in Organizational Research: A Taxonomy, Review, and Future Avenues. Organizational Research Methods, 22, 109442811774488. https://doi.org/10.1177/1094428117744882
Menon, R. G. V., Sigurdsson, V., Larsen, N. M., Fagerstrøm, A., & Foxall, G. R. (2016). Consumer attention to price in social commerce: Eye tracking patterns in retail clothing. Journal of Business Research, 69(11), 5008-5013. https://doi.org/10.1016/j.jbusres.2016.04.072
Mergenthaler, R. (2012). Principles-based versus rules-based standards and accounting irregularities.
Miah, M. S., Jiang, H., Rahman, A., & Stent, W. (2021). The impact of IFRS complexity on analyst forecast properties: The moderating role of high quality audit. International Journal of Finance & Economics. https://doi.org/10.1002/ijfe.2456
Miseviciute, I. (2022). How do eye trackers work? TOBII Company. https://www.tobii.com/resource-center/learn-articles/how-do-eye-trackers-work
Morais, A. I. (2020). Are changes in international accounting standards making them more complex? Accounting Forum, 44(1), 35-63. https://doi.org/10.1080/01559982.2019.1573781
Muhibudeen, L. (2015). International Financial Reporting Standard and Value Relevance of Accounting Information in Quoted Cement Firms in Nigeria. International Journal of Sciences: Basic and Applied Research (IJSBAR), 22(1), 81-95.
Nielsen, J. (2003). Usability 101: Introduction to Usability. http://www.ingenieriasimple.com/usabilidad /IntroToUsability.pdf
Paananen, M., & Lin, C. (2007). The development of accounting quality of IAS and IFRS over time: The case of Germany. Journal of International Accounting Research, 8. https://doi.org/10.2139/ssrn.1066604
Pascan, I.-D. (2014). MEASURING THE EFFECTS OF IFRS ADOPTION IN ROMANIA ON THE VALUE RELEVANCE OF ACCOUNTING DATA. Annales Universitatis Apulensis Series Oeconomica, 2(16). https://EconPapers.repec.org/RePEc:alu:journl:v:2:y:2014:i:16:p:24
Pomplun, M., & Sunkara, S. (2003). Pupil dilation as an indicator of cognitive workload in human-computer interaction. Proceedings of the International Conference on HCI.
Richards, G., & van Staden, C. (2015). The readability impact of international financial reporting standards. Pacific Accounting Review, 27(3), 282-303. https://doi.org/10.1108/PAR-08-2013-0086
Rotaru, K., Schulz, A. K. D., & Fehrenbacher, D. D. (2018). New technologies for behavioural accounting experiments. In The Routledge companion to behavioural accounting research. (pp. 253-272). Routledge/Taylor & Francis Group.
Slovic, P., Griffin, D., & Tversky, A. (1990). Compatibility effects in judgment and choice. In Insights in decision making: A tribute to Hillel J. Einhorn. (pp. 5-27). University of Chicago Press.
Tory, M., & Moller, T. (2004). Human factors in visualization research. IEEE Transactions on Visualization and Computer Graphics, 10(1), 72-84. https://doi.org/10.1109/TVCG.2004.1260759
Umoren, A. O., & Enang, E. R. (2015). IFRS Adoption and Value Relevance of Financial Statements of Nigerian Listed Banks. International Journal of Finance and Accounting 4(1), 1-7.
Vessey, I. (1991). Cognitive Fit: A Theory-Based Analysis of the Graphs Versus Tables Literature [https://doi.org/10.1111/j.1540-5915.1991.tb00344.x]. Decision Sciences, 22(2), 219-240.
Voßkühler, A., Nordmeier, V., Kuchinke, L., & Jacobs, A. M. (2008). OGAMA (Open Gaze and Mouse Analyzer): Open-source software designed to analyze eye and mouse movements in slideshow study designs. Behavior Research Methods, 40(4), 1150-1162. https://doi.org/10.3758/BRM.40.4.1150
Wedel, M., & Pieters, R. (2008). A Review of Eye-Tracking Research in Marketing. In N. K. Malhotra (Ed.), Review of Marketing Research (Vol. 4, pp. 123-147). Emerald Group Publishing Limited. https://doi.org/10.1108/S1548-6435(2008)0000004009
