The forgotten accounting chioce : A study about Attention to Detail in the note disclosure

Abstract: Background: Investors does seldom use the information provided within the notes when making investment decisions even though it is evident that notes impact the organisations share price. The reason is unclear, though hypothetically it is possible that the unawareness of potential advantages and disadvantages might be the problem. Thus, this report will aim to increase the investors and other stakeholders’ knowledge by measuring the Attention to Detail in organisations notes. Attention to Detail is in this report a measure proclaimed to align with the conservative accounting which then will measure the degree of detail the organisations’ display. Purpose: The purpose is to develop a measurement for ‘Attention to Detail’ and thereafter try to investigate what explains the Attention to Detail within the notes. Thus, the research question is stated as follows: What organisational factors impact companies’ Attention to Detail in their notes? Method: This report applies a deductive and positivistic approach where accounting theories are used to formulate hypothesises. The theories used are PAT/Agency Theory which participated in constructing two hypothesises regarding variable compensation and financial leverage, the Upper Echelon Theory that contributed to establishing a hypothesis concerning women in top position and the Institutional Theory that sympathised in the creation of industry differences hypothesis. A qualitative approach was conducted where data from a total of 175 firms was collected from their 2019 annual reports. To be able to investigate if the hypothesises established had any significant relationships with Attention to Detail, a Pearson correlation and Regression analysis was created.  Conclusion: It was found that financial leverage and different industrial sectors had a positive relationship towards Attention to Detail. It could also be concluded that the Institutional Theory had an explanatory power over the outcome of all the hypotheses and therefore is the most prominent accounting theory to explain the application of detail, in this study.