Title: The form is the message - a cognitive approach to the framing of the balance sheet

Authors: Benzion Barlev; David B. Citron; Joshua Rene Haddad

Addresses: Center for Academic Studies, Or-Yehuda, Israel; School of Business Administration, The Hebrew University, Mount Scopus, Jerusalem, 91905, Israel ' Cass Business School, City University, London, UK ' 7, Zichron Yaakov St., Tel-Aviv, 62999, Israel

Abstract: This study argues that the vertical form of the balance sheet is preferable to the dominant horizontal form. It emphasises, relying on cognitive psychology, that framing of balance sheet information may arouse attention to crucial economic indices, enhance awareness, and affect the average investor's investment decisions. An inquiry into the history of the balance sheet in the USA discloses unsuccessful efforts to establish the vertical as the standard form. It reveals also that endeavours to enhance the usefulness of the balance sheet overlooked the form of presentation. A questionnaire-study of 703 students reveals preference for the vertical form regardless of gender, specialisation, year of study, and subjects' role, CEO, investors and CPAs. This study is quite timely because the FASB is discussing, currently, the structure of financial reports.

Keywords: balance sheet; horizontal presentation; vertical presentation; decision making; attention; awareness; cognitive psychology; investment decisions; USA; United States; financial reports; financial report structure.

DOI: 10.1504/IJEA.2014.067426

International Journal of Economics and Accounting, 2014 Vol.5 No.4, pp.357 - 389

Received: 08 May 2021
Accepted: 12 May 2021

Published online: 10 Feb 2015 *

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