Identifying Decision Useful Information With the Matrix Format Income Statement

Preprint
Publisher Website
Google Scholar
Abstract
We conduct an experiment to investigate the understandability of an alternative format for the income statement, the matrix format, developed by the IASB and UK ASB in their joint project on performance reporting. Sophisticated financial statement users (financial analysts and professional accountants) and less sophisticated financial statement users (MBA students) extracted information from a set of financial statements that included an income statement either in the IAS 1 format or in the matrix format. We find that the matrix format improves the accuracy with which users extract financial information. This result is driven by greater accuracy, for all users groups, on 'below-the-line' items. Furthermore, despite lack of familiarity with the matrix format, its use does not appear to affect the time taken, the ease of extracting financial information, or users' task completion confidence. These findings may assist the FASB and IASB in their joint project on financial statement presentation.