An Experimental Investigation of Vagueness on the Left Side of Balance Sheet


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We investigated through experiments vagueness among property, plant, and equipment (PPE), intangible asset and inventory accounts. To semantic vagueness among items, epistemic vagueness is added in relation to liquidity order classification. Traditional dichotomy current/non-current classification of balance sheet items seems to have been used as a straitjacket, where inventories are current assets, and PPE and intangibles are non-current assets. While gray zone is ignored, items that lay on that are swept under the rug, i.e. arbitrarily classified in one way or another, hence, information asymmetry persists, and is neglected by auditors and standard setters. Literature suggests that the increase of information about underling economic transactions mitigate vagueness. Through the configurational approach, we identified five arrangements according to the intensity of property rights transference. Information about those five arrangements was provided to subjects. Evidences from between-subjects experiments (subjects were 93 MBA students enrolled on Accounting courses) suggest that the argued vagueness is acknowledge by financial statements users.

Keyword : classified balance sheet, IFRS, vagueness, experiment balanço patrimonial, IFRS, vaguidade, experimento

How to Cite
Cardoso, R. L., & Aquino, A. C. B. de. (2009). An Experimental Investigation of Vagueness on the Left Side of Balance Sheet. Brazilian Business Review, 6(2), 198-216.

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