Calibrating Word-Sized Graphics for Financial Accounting Applications: Evidence and Examples

Abstract

We argue that, to be complete, financial reports should provide information to users about all “material” items. It is therefore desirable that all material effects in financial graphs should be visible to users. If small, word-size graphics are calibrated improperly, users may overlook visually small but numerically material effects. Prior literature does not provide adequate design guidance. We test subjects' ability to detect differing absolute and relative size effects in sparklines. We expand the concept of cognitive fit to include minimum relative and absolute visual sizes of key effects. Consistent with the legibility literature, we find accounting student participants' ability to detect patterns and anomalies over certain approximate minimum relative and absolute size thresholds is robust. Two examples illustrate how our findings on approximate relative and absolute size thresholds apply to financial accounting applications. JEL Classifications: M41; M40.