The effects of accounting knowledge on the omission of value added information in wealth measurement and distribution decisions

Purpose – This study aims to examine whether accounting knowledge is associated with a decision maker's tendency to ignore value added information in wealth measurement and distribution decisions. Design/methodology/approach – A between‐subjects laboratory experiment was employed. Subjects prepared accounting reports that measured and distributed an entity's wealth based upon given accounting data. Accounting knowledge was measured as: a discrete variable by classifying subjects into high‐, low‐ and no‐accounting knowledge groups, and a continuous variable by classifying subjects on the number of accounting courses completed. Findings – Findings provide empirical evidence that high levels of accounting knowledge interferes with a decision maker's ability to incorporate value added information (versus accounting profit) in wealth measurement and distribution decisions. Research limitations/implications – This experiment used subjects from the USA where the production and disclosure of a value added report is not mandated. The results should be tested in a country where the statement of value added is routinely produced, disclosed and audited. Practical implications – This study shows the dysfunctional effect of accounting knowledge which appears to hinder performance in wealth measurement and distribution decisions. Originality/value – This is the first attempt to explain why decision makers may ignore value added information in wealth measurement tasks and distribution decisions by focusing on the role of knowledge structures.