A recent book by accounting professors Baruch Lev (New York University) and Feng Gu (SUNY Buffalo) proclaims “…the end of accounting.” There are many in the profession who argue with this but when the financial balance sheets, on average, represent just 18% of an organization’s market value one has to start to wonder why people rely on financial reporting to the degree that they do; especially investors? There is a “sea change” taking place as we move to the new economy; this change is similar to the aftermath of the great depression when much of financial reporting as we know it today was developed. Many accountants and business people also believed that change wasn’t needed at that time!
But in change there is opportunity; the FRC has released a paper on why culture is so important in business and MUST be addressed by boards; the ACCA recently released a number of studies of why culture is important as an aspect of financial management. These are sure signs that corporate reporting needs to change and focus more on the drivers of real lasting value. The work of organization’s like the Maturity Institute is moving this agenda forward and offering ways to assess the effectiveness of ‘capitals’ other than financial. If the accounting profession wants a future in the new world then embracing these broader reporting concepts must be part of their change agenda.
Nick Shepherd FCPA, FCGA; FCMC; FCCA