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Research in Accounting Regulation 21 (2009) 11–18

Research in Accounting Regulation 21 (2009) 11–18 Contents lists available at ScienceDirect Research in Accounting

Contents lists available at ScienceDirect

Research in Accounting Regulation

journal homepage: www.else Understanding the changes in accounting thought Rebecca

Understanding the changes in accounting thought

Rebecca Toppe Shortridge * , Pamela A. Smith

Department of Accountancy, Northern Illinois University, DeKalb, Illinois, United States

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Kuhnian theory Accounting paradigm shift Changes in accounting thought Conceptual framework


Financial accounting and reporting are in the midst of one of the most significant revolu- tionary changes in modern history. The purpose of this paper is to provide a framework that will contribute to the dialogue surrounding these developments. We use Kuhn’s [Kuhn, T. S. (1970). The structure of scientific revolutions. Chicago, IL: The University of Chicago Press] framework on the theory of scientific revolution to describe how changes in the need for information, coupled with the lack of relevant accounting information, led to reporting anomalies that have spurred a revolutionary shift in accounting paradigms. We are moving from an accounting paradigm that existed in the age of an industrial econ- omy to an accounting paradigm that fits the economy in an information age. This redirec- tion has resulted in the following: a change in the conceptualization and application of relevance and reliability, an increased use of fair value versus historical cost measure- ments, a renewed emphasis on principles versus rules, and an evaluation of the composi- tion of the basic financial statements.

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Financial accounting appears to be transforming, so much so that we are in the midst of one of the greatest revolutions since Pacioli invented double-entry accounting ( King, 2006 ). The purpose of this paper is to provide a framework that will contribute to the dialogue surround- ing these developments. The increased emphasis on fair value reporting, the reevaluation of the conceptual frame- work, the redesign of the basic financial statements, and the push toward principles-based accounting provide evi- dence of the advances. We use Kuhn’s (1970) description of change as a mechanism to understand the impact of the economic environment on accounting and the resulting shift that is emerging in accounting. Kuhnian theory has been used to describe the changes in accounting thought in the 1960s and 1970s ( Wells, 1976 ) and to describe the scientific foundations of accounting research ( Badua, Pre- vits, & Vasarhelyi, 2007 ). The dialogue from our discussion

* Corresponding author. E-mail addresses: (R.T. Shortridge), pamsmith@ (P.A. Smith).

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can assist in the understanding of these changes and may lead to refinements and wider acceptance of the revolution that is occurring. Thomas Kuhn’s, The structure of scientific revolutions (1970), describes the catalysts that cause a body of knowl- edge to transform paradigms, what happens during the transformation process, and the impact on practice as a re- sult of the changes. Kuhn’s work focuses on paradigms and revolutions in the context of the hard sciences; however, the process he describes provides insight about change in the social sciences as well. One difference between Kuhn’s scientific revolutions and the transformation in accounting is that the catalysts of change in the hard sciences (e.g. astronomy, physics, dynamics, and optics) are the physical laws of nature, while the catalysts of change in the social sciences are the social environments in which they operate. According to Kuhn, change occurs in two forms: evolution- ary and revolutionary ( Kuhn, 1970 , pp. 1–9). Evolutionary progress occurs when a body of knowledge is advanced on an incremental basis over time. Accounting has typically followed this pattern with slowly evolving standards issued in response to changes in practice. Revolutionary change occurs when a significant anomaly or crisis results in a


R.T. Shortridge, P.A. Smith / Research in Accounting Regulation 21 (2009) 11–18

movement of an entire body of knowledge away from a par- ticular stream of thought. Currently, accounting is undergo- ing a revolutionary change in thought regarding the core fundamentals upon which financial accounting is based. The catalysts for the transformation can be attributed to the movement from an industrial economy to an informa- tion economy, increased globalization, improvements in data availability, and increased information processing capabilities. We refer to the change in accounting fundamentals as a paradigm shift. The old paradigm, hereafter referred to as the industrial paradigm, existed during the industrial economy and was based on the FASB’s original conceptual framework. It emphasized historical cost measurements, was rules-based, and was focused on transactions and allo- cations ( Fig. 1 ). This paradigm reflected rules that allowed estimates and judgments but thrived on the certainty and precision garnered from historical cost measurements. The application of industrial age accounting practices in the new economy resulted in several anomalies in financial reporting that spurred significant changes in accounting thought. As a result of these developments, a new financial reporting paradigm emerged. The fundamentals of the new paradigm, hereafter re- ferred to as the information paradigm, exists in an infor- mation economy and is based on the proposed conceptual framework. Further, the new paradigm is principles- based, emphasizes fair value, and focuses on economic events (see Fig. 1 ). It is important to note that although the change from historical cost to fair value measure- ments currently has high visibility, this change alone is not what we are conceptualizing as a paradigm shift. All of the factors presented in the diagram are part of the paradigm shift. In the information model, the FASB (2006a) has proposed that the notion of reliability be re- placed with faithful representation. The new terminology is indicative of the FASB’s movement to emphasize the substance of economic events over their form. This new focus leads to an increased emphasis on principles versus

rules and fair value versus historical cost measures. Fig. 1 highlights the overlap that is occurring as the financial reporting environment moves from an industrial age to an information age. The shift in accounting paradigms is not complete, and therefore the standards issued during the transition period have characteristics from each paradigm. The remainder of this paper will expand our conceptu- alization of these paradigms and the shift that is occurring in the context of Kuhn’s framework. This paper first utilizes Kuhn’s theories to explain how accounting fundamentals can be described as a paradigm and why the change in fo- cus is a revolutionary movement. The next section pro- vides a brief discussion about the evolution of economies from a hunter-gatherer society to an information economy. This discussion is important because, as a social science, changes in the economic environment are the vehicles of changes in accounting. Because accounting did not evolve at the same rate as the economic environment, financial reporting anomalies arose. Ultimately, these deficiencies in accounting led to dissatisfaction with the accounting information generated under the industrial paradigm. These deficiencies highlight how economic advances influ- ence accounting and why the new paradigm in accounting is emerging. Finally, utilizing Kuhn’s theories, we discuss the stages of change occurring in the financial reporting revolution: the rejection of old traditions, the changes in the problems to be solved, and the alterations in the work- ing world.

Anatomy of a paradigm shift

Kuhn defines a paradigm as a body of knowledge that includes theory, application, and instrumentation, which produces ‘‘particular coherent traditions” ( Kuhn, 1970 , p. 10). A paradigm is based on the common models of thought that are used to establish rules of practice. The theories and applications are perpetuated through

Accounting in an Industrial Paradigm Accounting in an Information Paradigm Reliability synonymous with
Accounting in
an Industrial
Accounting in an
Reliability synonymous
with verifiability
Relevance prioritized in
proposed conceptual framework
Allocation of
Faithful representation
Fair values
replaces reliability
Transaction focused
Economic event focused
Rules - based
Principles - based

Fig. 1. Paridigms depicted.

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textbooks and instruction based on existing doctrines that are ingrained in the thoughts of those in the field. This reinforcement results in a paradigm that exists for decades and is applied by generations of practitioners and researchers. Despite the indoctrination of a paradigm, exceptions to that body of knowledge arise. These incon- sistencies are generally addressed with a series of incre- mental modifications that fit within the existing framework. Kuhn refers to successive alterations within a paradigm as evolutionary changes in the body of knowledge. Kuhn’s framework also discusses radical changes in thought that result in shifts in paradigms and thus gener- ate new theories and applications for those theories. In particular, Kuhn discusses three ways in which revolution- ary movements occur: (1) a search to explain an anomaly, (2) the emergence of new discoveries, or (3) in response to a crisis. Because of these events, an inconsistency emerges when the existing paradigm no longer satisfies the current state of being. Thus, a revolution begins to seek new theo- ries, which will answer questions the old ones could not resolve. Kuhn describes a revolution as a process that relin- quishes one set of beliefs for a different set of beliefs cham- pioned by a new regime (Kuhn, 1970, p. 93). Resistance to the new paradigm is inevitable as the old paradigm is in- grained in current professionals through both formal edu- cation and on-the-job experiences. Throughout the 1900s, accounting changes were evolu- tionary. When a new or updated accounting treatment was needed, a new standard or guidance was issued that fit within the existing paradigm. The evolution of capital lease accounting standards is a good example of this piecemeal progression. Since the 1970s, companies have tried to de- velop transactions that would achieve off-balance sheet financing, and accounting standards reacted to each new transaction in incremental steps. Standard setters imple- mented rules to address the new off-balance sheet transac- tions and then companies developed slightly different transactions to avoid the new rules. Over time, this led to the FASB providing lease guidance in more than 75 pro- nouncements ( Shortridge & Myring, 2004 ). This prolifera- tion of rules occurred because the FASB made incremental changes that were consistent with the indus- trial paradigm. These rules produced numerous reporting anomalies and an information crisis, which has prompted the users of financial reporting to demand change. As a re- sult, the accounting profession is in the midst of recon- structing some of the most basic fundamentals in the existing body of knowledge. Kuhn defines a reconstruction of this magnitude as a revolutionary paradigm shift (Kuhn, 1970 , p. 85). Identifying the beginning of the revolution is difficult. Alfred King, the vice-chairman of Marshall and Stevens, Inc. and a founding member of Appraisal Issues Tasks Force, indicates that the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have been moving toward fair value accounting and away from historical cost accounting for 30 years ( King, 2006 , xiii). Linsmeier (2003) FASB Board member, suggested that the impetus for the revolution occurred in the 1970s when the demand for financial

derivatives grew as a result of increased risk from foreign currency transactions 1 and increased volatility in oil prices 2 . He argues that the increased use of financial instru- ments resulted in a schism in what is reported under the industrial paradigm and what information is needed in the new economy. Regardless of when the revolution be- gan, the time for a change in the core fundamentals of financial reporting has come. The change in the core fundamentals is most evident in the changes occurring in the conceptual framework. Fig. 2 presents the hierarchy of accounting qualities developed by the FASB in Statement of Financial Accounting Concepts 2 ( FASB, 1980 ). In this hierarchy, relevance and reliability are the primary qualitative characteristics of decision-use- ful accounting information. The FASB never intended reli- ability to become synonymous with precision or certainty ( FASB, 1980, para 72). However, over time, reliability of information became synonymous with the verifiability of measurements and many began to believe that accounting information was precise. This is most clearly evident in the business press, where reference to accounting information is with terms like ‘‘correct”, ‘‘accurate”, and ‘‘right” (Gomes, 2004 ). Of course accounting information is not ‘‘accurate”, but is fairly represented given the facts, estimations, and judgments at the time. The connotations embedded in his- torical cost information also fueled the ‘‘expectations gap” between what information is reported and what users ex- pected from the information ( Australian Education Re- search, 2007 ). Fig. 3 depicts the authors’ interpretation of the hierar- chy of accounting qualities in the proposed conceptual framework currently being deliberated by the FASB (FASB, 2006a ). In this hierarchy, decision-useful information is information that is relevant, faithfully represented, compa- rable, and understandable. These characteristics are ap- plied sequentially when determining what information is reported, because the application of the characteristics follows a logical sequence (numbered 1, 2, 3, and 4 in Fig. 3 ). The first and most important characteristic is rele- vance ( FASB, 2006a , QC43). Relevance helps ‘‘identify which economic phenomena” need to be reported ( FASB, 2006a , QC43). Relevant information has predictive and confirmatory value and is timely. Once the relevant infor- mation is identified, the second qualitative characteristic requires it to be faithfully represented. This means that the information depicts the economic phenomena in a faithful manner ( FASB, 2006a , QC16). Faithfully repre- sented information is verifiable, neutral, and complete. In the 1980 conceptual framework, faithful representation was a component of reliability; in the proposed conceptual framework it stands alone and replaces the term reliability.

1 Corporations experienced increased risk from foreign currency trans- actions in the mid-1970s after President Nixon broke the Brenton Woods Accord. The Accord, established after World War II, tied all foreign exchange rates to the US dollar, which was based on the ‘‘Gold Standard”. In 1972, President Nixon broke the treaty (other countries had already done so) and US currency entered the ‘‘Free Float” system ( Michael Ryan Associates, 2007 ).

2 Volatility in oil prices increased dramatically after the creation of OPEC because the market no longer adjusted supply and demand with floating prices.

















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Fig. 2. Industrial paradigm conceptual framework.





Fig. 3. Information paradigm proposed conceptual framework.

Characteristics three and four of the proposed concep- tual framework are comparability and understandability. Once it is determined that the information is relevant and faithfully represented, that information must be com- parable. ‘‘Comparability is the quality of information that enables users to identify similarities in and differences be- tween two sets of economic phenomena” ( FASB, 2006a , QC35). This also implies that the same policies are consis- tently applied through time and across different situations. Finally, the information needs to be understandable. In the 1980 conceptual framework, this characteristic applied to the user of the information. In the proposed conceptual framework, the FASB recognizes that understandable infor-

mation must be ‘‘classified, characterized, and presented clearly and concisely” ( FASB, 2006a , QC39). The transformation of the conceptual framework is just one piece of evidence that there is a paradigm shift. As de- picted in Fig. 1 , there are other changes that parallel the changes in the conceptual framework. For example, there is a shift to fair value measurements, an increased empha- sis on principles versus rules, and an increased focus on economic events versus transactions. The information economy enables all of these changes because there is more information technology, more sophisticated valua- tion methodology, more globalization, and greater data accessibility.

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Because accounting is a social science, the driver of change is the environment in which it operates. Thus, in the next section, we discuss the evolution of the economic environment and how it impacts the transition from an industrial paradigm to the information paradigm.

Changes in the economy impacts the demand for information

As economies develop, the need for information in those environments changes. For example, counting with tokens met the needs of a hunter-gatherer society but does not meet the needs of a society that can move funds wire- lessly around the globe in an instant. Elliott and Jacobson (2002) described the emergence of economic environ- ments and how they altered the demand for information.

Hunter-gatherer, agricultural, and industrial economies

The first economy described by Elliott and Jacobson is the hunter-gatherer economy. In this economy, members of a tribe settled in regions that provided game and wild vegetables. Information consisted of technical knowledge about making tools, how to hunt, etc., and was presumably passed down from generation to generation in an informal setting. The agricultural economy followed in which farm- ing became the predominant occupation. Basu and Way- mire (2006) describe the development of seals or tokens that were used as a method of redistributing agricultural surplus. Written communication permitted the transfer of information, such as the knowledge of seasons and technology, which resulted in increased productivity. The surplus from agricultural productivity aided the develop- ment of commerce, social organizations, and government that could not function without a system of measurement and records ( Basu & Waymire, 2006; Mattesich, 1987 ). This led to the rise of scribes and stewards who kept records for religious organizations and manors to ensure they were running efficiently. Pacioli also developed double-entry bookkeeping during this economy. The development of machines created production surplus and is a key characteristic of the industrial age. As enterprises grew in size, ‘‘corporate” organizations devel- oped, which led to a separation between owners and the managers. The corporate form ‘‘had a great effect on information needs” ( Elliott & Jacobson, 2002 , p. 73). Reliable information was needed for the efficient allocation of resources; hence audits developed to validate that informa- tion. An essential part of the industrial age was long-lived factories, machinery, and equipment. Historical cost accounting provided a reliable measure of these assets that were held for long periods of time. Performance measure- ment during the industrial age was dependent on the delivery of goods, not payment of services. Hence, the focus of accounting was the allocation, or matching, of costs with revenues.

The information economy

The US and many other developed countries have en- tered the information economy. DeLong and Summers

(2001) discussed the emergence of the information econ- omy by highlighting the proliferation of technology and information processing power. Technology and the ease of obtaining information have also supported the global- ization of business. These changes, along with an increased reliance on the service industry, led former SEC Chairman Alan Greenspan to comment that in our economic environ- ment, ‘‘goods are increasingly valued not for their physical mass or other physical properties but for weightless ideas” ( DeLong & Summers, 2001 , p. 35). There is convincing evidence that the accounting infor- mation supplied to decision makers in the information economy is not meeting their needs. In 1991, Elliott called for a measure of rates of change and improved off-balance sheet disclosures in order to meet user needs ( Elliott, 1991 ). In 1992, he again called for internal and external accounting to change in light of the post-industrial econ- omy, in order to support the decision-making of manage- ment and third party users ( Elliott, 1992 ). The Association for Investment Management and Research (AIMR) report, Financial Reporting in the 1990s and Beyond , presented the financial analysts’ call for more current value measure- ments ( Knutson, 1993 ). The Jenkins Committee Report also called for enhanced transparency in the financial state- ments ( AICPA, 1991 ). Another indicator of the shortcomings of current accounting practice is the change in the relationship be- tween a company’s book value and market value. For example, a study of more than 10,000 companies found that shareholders’ equity represented 95% of the market value in 1979, but represented 28% of market value in 1998 ( Boulton, Liber, & Samek, 2000, p. 15 ). Much of this difference is likely attributable to historical cost measure- ments and intangible assets that are not recorded. Baruch Lev, professor of accounting at New York University, esti- mates that ‘‘intangibles comprise well over half the market value of public companies. Yet, with statements prepared under US generally accepted accounting principles, inves- tors can only guess at their value” ( Aston, 2002 , p. 110). In an information economy, a company’s revenue source is not only from selling products, but also from selling ser- vices. Almost half of the Fortune 100 companies provide a service rather than sell a product. Most of those companies provide some type of financial services. The entity in the information economy is no longer brick and mortar with tangible assets needed to produce revenues. The accounting in the industrial paradigm produced financial information that does not match the economic activities of the entity, or the needs of the financial state- ment user in an information age ( Clements, 1993 ). The incongruence of the industrial paradigm in an information age results in reporting anomalies and inconsistencies.

A revolutionary shift in accounting paradigms

Kuhn (1970, p. 6) expounds on three characteristics that he believes define scientific revolutions. First, revolutions mandate that practitioners reject one set of traditions in fa- vor of another set that is not compatible with the first (i.e. historical cost versus fair value). Second, the adoption of a


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new paradigm changes the problems to be solved (i.e. the estimates and judgments needed to determine fair value). Finally, revolutions alter the world of the practitioner in which the new paradigm is applied (i.e. education and training in valuation techniques and the need for more professional judgments). In this section, we will discuss evidence of each characteristic as accounting transforms from the industrial to the information paradigm.

Rejection of old traditions

The FASB, in conjunction with the IASB, is redefining the

current conceptual framework ( Fig. 2 ), which will result in

a new set of fundamentals as depicted in Fig. 3 . Perhaps

one of the most substantial changes is the role of relevance and reliability. Historically, relevance and reliability were portrayed as equal qualities that led to information that was useful in decision-making. As mentioned earlier, in the industrial age paradigm, the reliability of information became synonymous with verifiability. In the proposed conceptual framework, reliability is replaced with faithful representation and is secondary to relevance (see Fig. 3 ). The proposal is intended to move financial reporting away from transactions-based accounting that focuses on verifi- ability to an emphasis on faithful representation that re- flects economic substance over form. The movement to faithfully represent economic sub- stance will require practitioners to relymore on professional judgment. Thus, instead of focusing on the application of a rule, practitioners will need to understand the economic substance of the event so that the phenomenon is faithfully represented on the financial statements. The movement to- ward more principles-based standards is also consistent with the effort to achieve convergence with international standards. The Fitch Ratings (2006) confirm this by stating, ‘‘IFRS consist primarily of principles rather than a list of rules. Reporting thus includes a change in mindset rather than merely ensuring that ‘all the boxes are ticked.’” In addition to revising the conceptual framework, the basic financial statements are being re-evaluated. The

working principles established by the FASB and IASB staff include the idea that financial statements ‘‘should present information in a manner that separates an entity’s financ- ing activities from its operating and other activities” (FASB, 2006b , Attachment E, p. 3). This principle will likely result in a statement of financial position and an income state- ment that includes operating, investing, and financing sec- tions. In addition, the bottom-line net income number may disappear. This movement is a dramatic rejection of old traditions and is a construction of new ideas. In defense

of the movement, Robert Herz, chairman of the FASB, indi-

cated, ‘‘I know the world likes single bottom-line numbers and all of that, but complicated businesses are hard to

translate into one number” ( Reilly, 2007 ).

Change in the problems to be solved

The second characteristic of a revolution is a change in the problems that are to be solved. Problems under the industrial paradigm frequently revolved around measure- ment and recognition of costs and revenues. One signifi-

cant issue in the information paradigm is how to determine fair value. In an effort to resolve this issue, the FASB issued Concept 7, Using Cash Flow Information and Present Value in Accounting Measurements ( FASB, 2000b) and Statement 157, Fair Value Measurements ( FASB, 2006c ). Statement 157 does not require the use of fair val- ues in the financial statements; instead, it provides a defi- nition of fair value and a three-tier hierarchy for measuring fair value. Further, it attempts to provide a consistent def- inition of fair value using an exit price. If no market-based exit price is available (Level 1), the standard requires firms to use utilize estimation models to determine value. The guidance in the standard intends to alleviate some of the concerns about comparability. Another key problem to address in the information par- adigm is how to recognize revenues in the income state- ment. Specifically, in the industrial economy, revenue was included on the income statement when it was realiz- able and earned. This definition presented several anoma- lies in the industrial paradigm resulting in the issue being addressed more than 180 times in current GAAP ( Fitch Ratings, 2006 ). One particularly important issue will be how changes in fair value will be recognized on the income statement. In the industrial paradigm, some fair value changes are recognized on the balance sheet (in other com- prehensive income) and others are recognized on the in- come statement. Finding a solution to the issues related to revenue recognition is critical to successfully move to the information paradigm. In summary, the types of estimates and judgments used in determining fair value are much different than those used in cost allocation. David Larsen, a Managing Director at Duff and Phelps, says that even though it is difficult to estimate fair values, using consistent approaches to make estimates represents substantial improvement from historical costs ( MacFadyen, 2007 ). In order to make the estimates and judgments associated with valuation, accounting professionals will need to retool their skill set.

Alterations of the working world

The final characteristic that results from a revolutionary shift to a new paradigm is that the working world of practitioners is altered. All of the changes described in this paper will have a dramatic impact on the accounting pro- fession. In the past, because of the historical cost measure- ment attribute, accountants might have been appropriately called ‘‘allocators.” In today’s environment, they might better be known as ‘‘estimators.” As an indication of the changes in the working world, the AICPA has established the Accredited in Business Valuation (ABV) credential in order to add marketability and training to its membership. On June 21, 2007, the AIC- PA issued its first standard for valuation services, Statement on Standards for Valuation Services No. 1 to provide guid- ance for those in practice ( AICPA, 2007 ). In June 2007, the FASB began the process to establish a Resource Group on Valuation Guidance to assist practitioners with implementation issues. BDO Seidman, LLP noted in their February 2007 newsletter ‘‘it seems clear that the stan- dards issued or exposed for comment during 2006 laid

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the groundwork for expanded requirements to use fair va- lue in the future” ( BDO Seidman, 2007 ). This suggests that practitioners, both public and private, need to think about how they will implement these standards. As the imple- mentation date is pending, a tremendous amount of work still needs to be done. This means that education and train- ing of the accounting professional will need to change in response to the working environment. The new paradigm will also emphasize principles ver- sus rules. As a result, practitioners are adjusting to the idea of making more professional judgments, not just applying bright-line rules. The movement toward principles-based standards is in conjunction with FASB’s effort to converge with the IASB. This shift is occurring despite constituent concerns about litigation. Practitioners desire specific guidance that they can point to in defense of their deci- sions. This has led to bright-line standards in the past. The efficacy of the movement to principles will hinge on whether standard-setting bodies can avoid the temptation to meet the demands of practitioners. In summary, the overhaul of the current financial reporting environment will dramatically impact practice. The Wall Street Journal notes that ‘‘if adopted, the changes will likely force every accounting textbook to be rewritten and anyone who uses accounting—from clerks to chief executives—to relearn how to compile and analyze infor- mation” ( Reilly, 2007 ).


The discussion presented in this paper is intended to stimulate thought and dialogue about why changes in accounting are occurring rather than a debate about what changes are occurring. We applied Kuhnian theory as a framework to explain the revolutionary shift in accounting paradigms. Kuhn (1970) indicates that revolutionary changes result in the reconstruction of the most basic fun- damentals of an existing body of knowledge. Accounting is in the midst of this type of transformation as it is creating new fundamentals that change the questions to be an- swered and the work life of practitioners. According to Kuhn’s framework, the paradigm shift in accounting will follow a series of identifiable steps. First is the recognition of anomalies. The anomalies in financial reporting were spurred on by a change in the economic environment and lack of change in the existing accounting paradigm. Dissatisfaction with the existing theoretical framework led to the development of new ideas about how to address the shortcomings. Over time a new school of thought has emerged from these ideas. The emergence is of such significance that it is transforming the old para- digm into a new paradigm of thought. Because the old par- adigm was ingrained over decades, we are now in a period of resistance to the new school of thought. Kuhn notes that acceptance of the new paradigm will take time, ‘‘Its assim- ilation requires the reconstruction of prior theory and the reevaluation of prior fact, an intrinsically revolutionary process that is seldom completed by a single man and never overnight” ( Kuhn, 1970 , p. 7). During the period of change, standards may be in conflict with each other. Kuhn states that, ‘‘During the transition period there will be large

but never complete overlap between the problems that can be solved by the old and by the new paradigm. But there will be a decisive difference in the modes of solution” ( Kuhn, 1970 , p. 85). As a social science, changes in accounting have the added dimension of human behaviors that interact with the accounting paradigm. Much of the debate in practice integrates the behavioral dimension, and rightfully so. Although accounting must respond to the changes in the economic environment, it cannot control the behaviors of individuals within the practice, no more than it can control the economic environment. Both are unpredictable. There- fore, the paradigms adjust as best as they can in the con- text of an ever-changing environment.


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