Digital reporting formats and users of financial reports : decision quality, perceptions and cognitive information processing in the context of recognition versus disclosure : a thesis submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Accountancy, Massey University
The evolvement of digital reporting has changed the way financial information is prepared
and disseminated (Debreceny and Gray, 200 1 ). Previous research has shown that digital
reporting has increased, particularly in the last five years, and this usage is characterised by
greater volumes of business and financial information over that traditionally provided in
print-based mode (Smith, 2003). The new opportunities and benefits offered by digital
reporting are matched by challenges and implications not only for the preparers and
auditors but also for users. It is expected that in the near future, financial reporting will
move entirely from the primarily print-based mode to digital-based mode as the primary
information dissemination channel (Oyelere et aI., 2003; Fisher et aI., 2004).
Research in the area of digital reporting has been conducted in the past decade. Within this
research, a considerable number of issues have been raised. These issues relate to various
parties, such as policy makers, preparers, auditors, system designers and users. While
several research questions and hypotheses concerning these parties have been posed and
investigated, most of the research questions and hypotheses have been formed from a
preparers' perspective, leaving the examination of issues from a users' perspective largely
This study focuses on users. It examines the effect of presentation formats on decision
makers' performance in relation to decision quality, perceptions and cognitive information
processing in the digital reporting environment. It aims to extend the digital reporting
This study extends the existing body of knowledge on digital reporting environment in
several ways. First, this study examines the effect of presentation formats on the quality of
users' decision making. This study follows Kleinmuntz and Schkade (1993) who described
'decision quality' in the context of two cost-benefit dimensions in relation to decision
makers' cognitive processes, namely decision accuracy and cognitive effort. Decision
accuracy reflects the ability of a strategy to produce an accurate outcome while cognitive
effort reflects the total cognitive expenditure incurred in completing a task. Second, this
study examines users' perceptions of three digital presentation formats: PDF, HTML and
XBRL. This study compares subjects' perceptions of usefulness and ease of use of the
three presentation formats with their actual outcome. It also includes examining whether
perceptions are an important factor in influencing preferred presentation format. Finally,
this study examines whether digital presentation formats address the concern over
functional fixation in the accounting context of 'recognition versus disclosure' in the
reporting of financial information.
This study used public accounting practitioners in New Zealand as participants. Sixty two
subjects participated in the experiment, which involves an experiment exercise and a post
The results indicate that presentation formats impact on decision accuracy. This finding is
consistent with previous studies conducted using non-digital presentation formats such as
tabular and graphical in the psychology and information systems literature (Stock and
Watson, 1984; Dickson et aI., 1986; Iselin, 1988; DeSanctis and Jarvenpaa, 1989; Mackay
and Villareal, 1987; Hard and Vanacek, 1991; Stone and Schkade, 1991; Anderson and
Kaplan, 1992; Bricker and Nehmer, 1995; Ramarapu et aI., 1997; Frownfelter-Lohrke,
1998; Almer et aI., 2003). The results, however, indicate that presentation formats do not
impact decision makers' cognitive effort. These findings suggest that preparers, standardsetters
and regulatory bodies should recognise that presentation format impacts on users'
decision making processes and select appropriate formats that lead to improvement in
Additionally, the results indicate that users' perceptions of the usefulness and ease of use of
the reporting technologies are similar across the three presentation formats. The results also
show that users' perceptions do not necessary correspond to actual performance. Users'
perceptions are found to influence their preferred presentation format. The findings of this
study provide useful insights on users' perceptions, performances and preferences of the
digital presentation formats. Such results provide a holistic and comprehensive view of the
importance of perceptions and the effect of presentation formats on decision makers'
performance. This is particularly relevant since if more advanced forms of digital reporting
are to be encouraged, then there is also the need for users to be made more aware of the
benefits to be gained from the different forms of presentation.
Finally, the results show that of the four recognised stages of information processing (i.e.
acquisition, evaluation, weighting and judging information), functional fixation is found to
only exist at the judgment stage. However, the effect of presentation format is only
significant at information evaluation stage. The results indicate that the interaction between
presentation formats and placement of information does not affect decision makers'
information processing. This suggests that presentation formats do not solve the concern
about recognition versus disclosure (functional fixation) in information processing stages.
These fmdings are not consistent with Hodge et al. (2004) but are consistent with Luft and
Shields (2001) who suggest functional fixation could not be alleviated because the
accounting itself would affect the allocation of people's attention.
This study extends the literature on presentation format by examining the quality of
decision making arising from the use of different presentation formats in a digital reporting
environment. It provides evidence that users' perceptions of ease of use of a presentation
format do not necessarily correspond to their actual performance (cognitive effort) once a
particular task has been performed. This study also provides evidence that the acceptance
of a technology is highly dependent on the perceptions of that technology. Therefore,
limited knowledge and appreciation of the capabilities of a technology may have the
undesired effect of deterring use of the technology although it may improve performance.