3 years ago

an investigation of the usefulness of accounting information for ...

an investigation of the usefulness of accounting information for ...


Statements Mean SD M / V Q / NQ H / F Notes to accounts 4.00 0.69 M NQ H Disclosure of subsequent events 4.13 0.57 V NQ F Remuneration of directors and officers 3.60 0.89 V Q H Research and development cost 3.70 0.75 M NQ H Capital expenditure 4.03 0.56 M Q H List of board members and their affiliations 3.37 1.03 V NQ H Details about export transactions 3.40 0.81 V Q H Financial summary 3.97 0.67 V Q H Accounting standards 4.07 0.58 M NQ H Flexible reserves 3.57 0.68 M Q H Pension cost 2.93 0.58 V NQ H Inventory costing method 3.33 0.88 V NQ H Acquisition method 3.37 0.81 M NQ H Accounting for goodwill 3.93 0.69 M NQ H Deferred taxes 3.70 0.88 M Q H Outside manager of pension funds 3.07 0.78 V NQ H Accounting policies regarding Minority interest 3.23 0.82 V NQ H Address / Telephone / Fax of the company 3.27 1.08 V NQ H Product segment 3.60 0.77 M Q H Geographic segment 3.63 0.61 M Q H Management information 3.70 0.84 V NQ H Subsidiaries information 3.80 0.71 V NQ H Number of employees 3.43 0.90 V NQ H The period covered by financial statements 3.77 0.90 M NQ H Company legal status (Private / Privatisation) 3.67 0.96 M NQ H Company name 3.90 0.88 M NQ H Opportunities and risks including those resulting from key trends 3.97 0.61 V NQ F Management’s plans, including critical success factors 4.10 0.66 V NQ F Comparison of actual business performance to previously disclosed opportunities, risks & management’s plans 4.13 0.51 V NQ H Forecasted earnings 4.30 0.75 V NQ F Percentage growth goals for revenue and EPS 4.27 0.78 V NQ F Future plans 4.20 0.85 V NQ F Long-terms financial leases 4.23 0.68 V NQ F Contingent liabilities 3.90 0.76 V NQ F Chairman / CEO’s statement 3.87 0.78 V NQ F Entities objectives 3.90 0.84 V NQ H Table 1 – Part II From Table 1, the top and bottom eleven items of information in respect to the mean scores awarded for their usefulness in investment decision-making can be extracted. The top eleven items extracted from table 1 in terms of the highest mean awarded 8

(4.00 or higher) for their usefulness are: cash flow statement, dividends per share, earnings per share, retained earnings, non-current assets, appropriation of retained earnings, goodwill and other intangibles, shareholders' equity changes, liabilities, current assets and forecasted earnings, respectively. These results prove that financial analysts and brokers rated historical financial statement information relating to cash flow statement and dividends per share as the most useful accounting information. This result is consistent with Ou & Penman’s (1989) findings where their tests show that historical financial statements data predict successfully future earnings performance and as a result facilitate financial analysts and brokers‟ investment decision-making process. The eleven least important items of information in terms of the lowest means (3 or lower) extracted from table 1 are: pension cost, outside manager of pension funds, minority interest, accounting policies regarding minority interest, address/telephone/fax of the company, selling, general and administrative expenses, inventory costing method, acquisition method, list of board members and their affiliations, details about export transactions and number of employees. These results indicate the low levels of interest attached to the information listed above by the financial analysts and brokers’ community. This might be explained by the fact that financial analysts and brokers may not be interested in details such as address/telephone/fax of the company and number of employees as such information may have been available to financial analysts and brokers on an informal basis through direct contacts with the company. Thus, financial analysts and brokers pay less attention in seeing details about these items disclosed in the financial statements. On the contrary, the lowest standard deviation values were assigned to the following accounting information: cash flow statement, current assets, dividend per share and earnings per share. This might reflect consistency among financial analysts and brokers’ perceptions regarding the usefulness of these items of information. These results indicate that financial analysts and brokers in Mauritius lay more emphasis on dividend, cash flow, earnings and current assets figures. This finding is supported by an analysis of the ranking of the categories of information according to their relative importance in decision-making (Table 3). The list of accounting information has been broken into different categories of information namely: cash flow statement, statement of financial position, stockholders' information, accounting policies, supplementary information, income statement and general information. An average computation has been carried out for the seven categories of information listed above. More precisely average mean and average standard deviation have been computed for each category of information and this can be illustrated in table 3. 9

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