You are on page 1of 2

Accounting practitioners, users, and standard setters continue to pursue a mythical,

determinate bottom line in spite of the known limitations of accounting measures.


PROBLEMS WITH ACCOUNTING MEASURE

Why the myth of the bottom line is so persistent. This section posits four possible
explanations: 1) Western cultural bias in accounting; 2) innumeracy and ritual; 3)
artifacts of a weak credentialization movement; and 4) inordinate faith in market
equilibrium as a basis for social justice.
Cultural Bias. The mindset that a single, noncontroversial bottom line exists is
common among the functionally innumerate. It is no less common among the
financial elite who use the very myth of a determinate bottom line as the basis for
lawsuits to recoup stock market losses.
Innumeracy and Ritual. Accountings role as information for decision-making
purposes is not nearly as important as its function as a symbolic ritual. Cleverly
1973suggests the act of drawing up a set of elaborate financial statements
accompanied by a detailed audit is not meant to serve the purpose of providing data

for decision making but rather to serve the purpose of providing a symbolic sense of
appeasement.
Artifacts of a Weak Credentialization Movement. Accountants may be aware of
the limitations of their measures, but are so enmeshed in a politically weak
credentialization movement that they feel compelled to promise an inordinate
degree of accounting precision.
Inordinate Faith in Market Processes. Lehman 1992is particularly critical of
capital markets research because it focuses on the information value of accounting,
while ignoring the ways in which accounting measures are affected by social power
structures. Capital markets researchers tend to ignore the public interest challenges,
treating problems in accounting measures as insignificant noise. This failure to
engage in meaningful dialog between capital markets and public interest
researchers may derive from harsh public interest rhetoric that labels traditional
accounting and standard-setting processes as bullshit Macintosh 2006 and the
hunting of snarks Page 2005, or an unwillingness to revamp the techniques and
infrastructure dedicated to the dominant capital markets paradigm.
Implications of the Inherent Paradoxes of Accounting. Not all accounting
issues can be solved with better rules and more consistent conceptual frameworks.
Allocation and boundary problems can be alleviated only by having users who are
sophisticated enough to understand and distinguish between those elements of
accounting reports that are objective and those that are arbitrary by their very
nature. The accounting profession needs to consider why we feel compelled to
change our rules and frameworks in response to each and every criticism while
attorneys and doctors do not. Physicians and hospitals are not shy about making
patients sign waivers of responsibility that specifically list all kinds of risks and
negative outcomes. And the courts assume that legal clients not only can but should
assist their attorneys in making decisions on legal strategy. In contrast, tax
franchises run advertisements promising they can find errors that other
accountants missed, reinforcing the popular idea that there is only one right answer.
The accounting profession seems trapped in a cycle of constantly revising their rules
and concepts. We go from method A, to method B, and eventually back to method A
in reaction to a constant barrage of political crises