General rightsThis document is made available in accordance with publisher policies. Please cite only the published version using the reference above. Full terms of use are available: http://www.bristol.ac.uk/pure/about/ebr-terms 1 Investigating new methods of measuring the understandability of accounting narratives.Michael John. Jones* and Malcolm Smith** * University of Bristol **Edith Cowan University, Western Australia
AcknowledgementsWe recognise the research assistance of Jacqui Whale in the construction of this paper. We would also like to thank participants at the 14 th Annual Financial Reporting and Business Communication conference in Bristol in July 2010, particularly the discussant Garcia Beatriz Osman. We would also like to thank participants at seminars given at the British Accounting and Finance Conference in April 2011 in Birmingham, UK and at the European Accounting Association in Rome in April 2011. Finally, we would like to thank the two reviewers of this paper for their informed comments.
2
ABSTRACT PurposeThe study explores the use of alternative measures of 'understandability' on accounting texts. This includes the Meaning Identification test (MIT) and the Sentence Verification Technique (SVT), which have not previously been used by accounting researchers, as well as variants on the traditional CLOZE tests such as the C-Test. Design/methodology/approach The prior literature in accounting has strongly argued that readability and understandability are different, if related topics. There has also been considerable criticism of the existing measures, such as the Flesch test and Cloze Procedure, which have been used to assess the readability and understandability of accounting narratives. This study focuses on the understandability of accounting texts and evaluates how reliable the Cloze test is as a measure of comprehension. An experiment was designed and conducted to measure users' performance with a variety of comprehension measures. Findings The study concludes that the outcomes from the MIT and SVT comprehension tests are not significantly associated with those from the CLOZE tests. This implies that while the Cloze test is a good measure of the predictability of accounting narratives, and of textual redundancy, it does not necessarily measure the understandability of the text. Originality/value These measures of understandability, which have not previously been used in accounting, would enable researchers to test the communicational effectiveness of using different accounting narratives such as annual reports or prospectuses. Such a measure could be used to improve the understandability of accounting narratives. The strengths and weaknesses of the various tests are assessed. It is suggested that there is a need for further experimentation especially with the MIT test.