David T. Dearman
Arkansas State University
Michael D. Shields
Michigan State University
Abstract: Much research over the last 40 years has provided evidence that individuals display accounting fixation—their cognitive decision processes do not appropriately change in response to variation in accounting method. This study presents results of a quasi-experimental test of the hypothesis that cognitive adaptation to a change in accounting method is an ordinal interactive function of general problem-solving ability, relevant accounting knowledge, and intrinsic motivation. Based on a product-pricing task in which subjects were provided product costs reported by two cost accounting systems (an activity-based costing system and a volume-based costing system) results show that the majority of subjects did not change their decision processes when there was a change in the costing system. Those subjects who adapted their decision processes to that change did so by debiasing costs reported by the volume-based costing system. Furthermore, these adapters had high values for all three of the person characteristics, as predicted.
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