Not everything that can be counted, counts. And not
everything that counts can be counted.
Albert Einstein
Probably be an accountant. I like to
figure out stuff. In accounting, if you miss one number you get the whole thing
wrong. You have to be perfect --- I'm a perfectionist.
Giovani Soto (catcher for the Chicago
Cubs when asked what he'd like to be if he wasn't in professional baseball), as
quoted in in an interview with Mary Burns in Sports Illustrated, June
2008
Jensen Comment
If Soto only knew that accountants are second only to economists in terms of
inaccuracies. When accountants total up the numbers on a balance sheet the total
is always accurate, but the numbers being added up can be off by 1000% or more.
Accuracy varies of course. Cash counts are highly accurate. Fixed assets, net of
depreciation, are make-pretend within limits. Intangible asset valuations are
about as accurate as ground eyesight measurements of floating cloud dimensions
on a windy day. Accountants make highly inaccurate estimates of assets,
liabilities, and equities. Then accountants change hats and chairs and add these
estimates up very accurately and pretend that the total must mean something ---
but accountants aren't sure what.
If
Soto wants accuracy perhaps he should become a baseball statistician collecting
up subjective estimates of the umpires. In the business world, accountants are
the statisticians and the umpires. Therein lies the problem. An umpire decides
what's a ball/strike, hit/foul, etc. and then leaves it up to baseball
statisticians to book the numbers. In the world of business, accountants decide
what are current versus deferred revenues, current versus capitalized costs, and
additionally make highly subjective estimates about values of such things as
forward contracts and interest rate swaps. After making their inaccurate
estimates they then put on another hat, change chairs, and record their own
estimates to the nearest penny. They're the business world's umpires and
statisticians who simply change hats and chairs and wait for the investors to
file lawsuits against them.
Brief Summary of Accounting Theory
Bob Jensen at Trinity University
Warning 1: Many of the links were broken when
the FASB changed all of its links. If a link to a FASB site does not work
, go to the new FASB link and search for the document. The FASB home page
is at http://www.fasb.org/
Warning 2: In February 2008 the FASB for
the first time allowed users free access to its "FASB Accounting Standards
Codification" database. Access will be free for at least one year, although
registration is required for free access. Much, but not all, information in
separate booklets and PDF files may now be accessed much more efficiently as
hypertext in one database. The document below has not been updated for the
Codification Database. Although the database is off to a great start, there is
much information in this document and in the FASB standards that cannot be found
in the Codification Database. You can read the following at
http://asc.fasb.org/asccontent&trid=2273304&nav_type=left_nav
Welcome to the Financial Accounting Standards Board
(FASB) Accounting Standards Codification™ (Codification).
The Codification is the result of a major four-year
project involving over 200 people from multiple entities. The Codification
structure is significantly different from the structure of existing
accounting standards. The Notice to Constituents provides information you
should read to obtain a good understanding of the Codification history,
content, structure, and future consequences.
FASB's Accounting Standards Codification ---
http://asc.fasb.org/home
FASB Master Glossary ---
http://asc.fasb.org/glossary&letter=D
**************************
Accounting
History in a Nutshell
Islamic
and Social Responsibility Accounting
XBRL: The Next Big Thing
Key
Differences Between International (IFRS) and U.S. GAAP (SFAS)
Accounting
Research Versus the Accountancy Profession
Learning
at Research Schools Versus "Teaching Schools" Versus "Happiness"
With a Side Track into Substance Abuse
Why must all accounting doctoral programs be social
science (particularly econometrics) doctoral programs?
Why accountancy doctoral programs are drying up and
why accountancy is no longer required for admission or
graduation in an accountancy doctoral program
GMAT: Paying for Points
Accounting Journal Lack of Interest in
Publishing Replications
Role of Accounting Standards in
Efficient Equity Markets
Controversies in
Setting Accounting Standards
Should "principles-based"
standards replace more detailed requirements for complex
financial contracts such as structured financing contracts and financial
instruments derivatives contracts?
Why Let the I.R.S. See What the S.E.C.
Doesn't?
Radical Changes in Financial Reporting
Underlying
Bases of Balance Sheet Valuation
The Controversy
Between OCI versus Current Earnings
Accrual Accounting and
Estimation
Controversy Over the SEC's Rule 144a
Cookie Jar Accounting and FAS 106
FIN 48 Liability if Transaction Is Later
Disallowed by the IRS
Controversy Over FAS 2 on Research and
Development (R&D)
Earnings Management, Agency Theory, and Accounting Manipulations
Goodwill
Impairment Issues
Purchase Versus Pooling: The Never
Ending Debate
Off-Balance
Sheet Financing (OBSF)
Insurance:
A Scheme for Hiding Debt That Won't Go Away
CDOs: A Scheme for Hiding Debt That Won't Go Away
Pensions
and Post-retirement benefits:
Schemes for Hiding Debt
Leases:
A Scheme for Hiding Debt That Won't Go Away
Accounting for Executory Contracts Such as
Purchase/Sale Commitments and Loan Commitments
Debt Versus Equity (including
shareholder earn-out contracts)
Time versus Money
Intangibles
and Contingencies:
Theory Disputes Focus Mainly on the Tip of the Iceberg
Intangibles: An Accounting Paradox
Intangibles: Selected References On
Accounting for Intangibles
EBR: Enhanced Business Reporting
(including non-financial information)
The Controversy Over Revenue Reporting and HFV
The
Controversy Over Employee Stock Options as Compenation
Accounting for Options to Buy
Real Estate
The Controversy over Accounting
for Securitizations and Loan Guarantees
The Controversy Over
Pro Forma Reporting
Triple-Bottom
(Social, Environmental) Reporting
The Sad State of Government Accounting and
Accountability
Which is More Value-Relevant:
Earnings or Cash Flows?
The Controversy Over Fair Value (Mark-to-Market)
Financial Reporting
Online Resources for Business
Valuations
See
http://www.trinity.edu/rjensen/roi.htm
Understanding the Issues
Issues of Auditor
Independence
Quality of Earnings, Restatements,
and Core Earnings
Sale-Leaseback Accounting Controversies
http://www.trinity.edu/rjensen/ecommerce/eitf01.htm#SaleLeasback
Economic Theory of Accounting
Socionomics Theory
of Finance and Fraud
Facts
Based on Assumptions: The Power of Postpositive Thinking
Critical Postmodern Theory ---
http://www.uta.edu/huma/illuminations/
Mike Kearl's great social
theory site
Bob Jensen's threads on GAAP comparisons (with
particular stress upon derivative financial
instruments accounting rules) are at
http://www.trinity.edu/rjensen/caseans/canada.htm
The above site also links to more general GAAP comparison guides between
nations.
Implications of Bad Auditing on Capital Markets
and Client's Cost of Captial
http://www.trinity.edu/rjensen/FraudConclusion.htm#IncompetentAudits
Bob Jensen's threads on corporate governance are at
http://www.trinity.edu/rjensen/fraud.htm#Governance
Great Minds in Management: The Process of Theory
Development ---
http://www.trinity.edu/rjensen//theory/00overview/GreatMinds.htm
"Cornell Theory Center Aids Social Science Researchers,"
PR Web, June 19, 2006 ---
http://www.prweb.com/releases/2006/6/prweb400160.htm
How Do Scholars Search? ---
http://www.trinity.edu/rjensen/Searchh.htm#Scholars
Some of the many, many lawsuits settled by auditing
firms can be found at
http://www.trinity.edu/rjensen/Fraud001.htm
FREE access to ANNUAL REPORTS in XBRL ---
http://www.trinity.edu/rjensen/XBRLandOLAP.htm#TimelineXBRL
From EDGAR Online ---
http://www.tryxbrl.org/
-
You can order back issues or relevant links management and accounting
books and journals from MAAW ---
http://maaw.info/
Free Access to Back Issues of The Accounting Review ---
http://maaw.info/TheAccountingReview.htm
Bob Jensen's threads on special purpose (variable interest)
entities are at
http://www.trinity.edu/rjensen//theory/00overview/speOverview.htm
"Visualization of Multidimensional Data" ---
http://www.trinity.edu/rjensen/352wpVisual/000DataVisualization.htm
Bob Jensen's threads on XBRL are at
http://www.trinity.edu/rjensen/XBRLandOLAP.htm#XBRLextended
Accounting for Electronic Commerce, Including Controversies
on Business Valuation, ROI, and Revenue Reporting ---
http://www.trinity.edu/rjensen/ecommerce.htm
Comparisons of International IAS Versus FASB Standards ---
http://www.deloitte.com/dtt/cda/doc/content/pocketiasus.pdf
Bob Jensen's Enron Quiz (with answers) ---
http://www.trinity.edu/rjensen/FraudEnronQuiz.htm
Tom Selling's blog The Accounting Onion (great on theory and practice)
---
http://accountingonion.typepad.com/
"Corporate Reports Now Searchable Via EDGAR," SmartPros, June
16, 2006 ---
http://accounting.smartpros.com/x53502.xml
Investors and analysts can now search the full
text of every SEC document filed by companies within the last two years.
They'll also be able to retrieve mutual fund filings by fund or share
class.
The company filing search engine enables
real-time, full-text searches of filings on the entirety of the SEC's
EDGAR (Electronic Document, Gathering, Analysis and Retrieval) database
of company filings for the last two years. The tool can be found at
http://www.sec.gov/edgar/searchedgar/webusers.htm.
SEC Chairman Christopher Cox, a strong
proponent of using the Internet to post dynamic financial reports and to
serve as a tool for investors and analysts made the announcement in his
opening remarks at the SEC's Interactive Data Roundtable in Washington,
D.C.
"This new full-text search capability will give
investors and analysts instant access to the specific information they
want," said Cox.
The new mutual fund search capability was made
possible when the SEC recently required that filings contain a unique
numerical identifier for each fund and share class. Investors will be
able to find relevant filings by searching for the name of their own
fund. In the past, searching for information on particular funds and
particular share classes within funds was very difficult, because a
single prospectus might contain information about many mutual funds and
share classes.
The SEC is asking users of this Web site
feature to supply feedback, including suggestions for additional
functions, so that further improvements to the site can be considered
and implemented.
Paul Pacter has been working hard to both maintain his international
accounting site and to produce a comparison guide between international and
Chinese GAAP. He states the following on May 26, 2005 at
http://www.iasplus.com/index.htm
May 26, 2005: Deloitte (China) has published
a comparison of accounting standards in the People's Republic of China and
International Financial Reporting Standards as of March 2005. The comparison
is available in both English and Chinese. China has different levels of
accounting standards that apply to different classes of entities. The
comparison relates to the standards applicable to the largest companies
(including all non-financial listed and foreign-invested enterprises) and
identifies major accounting recognition and measurement differences. Click
to download:
The chronology of events leading up to European adoption if common
international accounting standards ---
http://www.iasplus.com/restruct/resteuro.htm
Large International Accounting Firm History ---
http://en.wikipedia.org/wiki/Big_Four_auditors
Tom Selling's blog The Accounting Onion (great on theory and practice)
---
http://accountingonion.typepad.com/
This is a Good Summary of Various Forms of Business Risk
--- http://www.erisk.com/portal/Resources/resources_archive.asp
-
Enterprise Risk Management
-
Credit Risk
-
Market Risk
-
Operational Risk
-
Business Risk
-
Other Types of Risk?
Accounting
History in a Nutshell
Confucius is described, by Sima Qian and other sources, as having endured
a poverty-stricken and humiliating youth and been forced, upon reaching
manhood, to undertake such petty jobs as accounting and caring for
livestock.
Early accounting was a knotty issue
South American Indian culture apparently used layers of knotted strings as a
complicated ledger.
Two Harvard University researchers believe they
have uncovered the meaning of a group of Incan khipus, cryptic assemblages
of string and knots that were used by the South American civilization for
record-keeping and perhaps even as a written language. Researchers have long
known that some knot patterns represented a specific number. Archeologist
Gary Urton and mathematician Carrie Brezine report today in the journal
Science that computer analysis of 21 khipus showed how individual strings
were combined into multilayered collections that were used as a kind of
ledger.
Thomas H. Maugh, "Researchers Think They've Got the Incas' Numbers," Los
Angeles Times, August 12, 2005 ---
http://www.latimes.com/news/science/la-sci-khipu12aug12,1,6589325.story?coll=la-news-science&ctrack=1&cset=true
Jensen Comment: I'm told that accounting tallies in Africa and other
parts of the world preceded written language. However, tallies alone did
not permit aggregations such as accounting for such things as three goats
plus sixty apples. Modern accounting awaited a combination of the Arabic
numbering (
http://en.wikipedia.org/wiki/Arabic_numbers ) and a common valuation
scheme for valuing heterogeneous items (e.g., gold equivalents or currency
units) such that the values of goats and apples could be aggregated. It is
intriguing that Inca knot patterns were something more than simple tallies
since patterns could depict different numbers and aggregations could
possibly be achieved with "multilayered collections."
From Texas A&M University
Accounting History Outline ---
http://acct.tamu.edu/giroux/history.html
Accounting History Timeline ---
http://acct.tamu.edu/giroux/timeline.html
Accounting History (across
hundreds of years)
A Change Fifty-Years in the Making, by Jennie Mitchell, Project
Accounting WED Interconnect ---
http://accounting.smwc.edu/historyacc.htm
Serious Accounting Historians May Find Some Things of Use Here
Advanced Papyrological Information System from Columbia University ---
http://www.columbia.edu/cu/lweb/projects/digital/apis/
APIS is a collections-based repository hosting
information about and images of papyrological materials (e.g. papyri,
ostraca, wood tablets, etc) located in collections around the world. It
contains physical descriptions and bibliographic information about the
papyri and other written materials, as well as digital images and English
translations of many of these texts. When possible, links are also provided
to the original language texts (e.g. through the Duke Data Bank of
Documentary Papyri). The user can move back and forth among text,
translation, bibliography, description, and image. With the
specially-developed APIS Search System many different types of complex
searches can be carried out.
APIS includes both published and unpublished
material. Generally, much more detailed information is available about the
published texts. Unpublished papyri have often not yet been fully
transcribed, and the information available is sometimes very basic. If you
need more information about a papyrus, you should contact the appropriate
person at the owning institution. (See the list of contacts under Rights &
Permissions.)
APIS is still very much a work in progress; current
statistics are shown in the sidebar at right. Other statistics are available
on the statistics page in the project documentation. Curators of collections
interested in becoming part of APIS are invited to communicate with the
project director, Traianos Gagos.
More Than a Numbers Game: A Brief History of Accounting
Author: Thomas A. King
ISBN: 0-470-00873-3
Hardcover 242 pages
September 2006
Inspired by a 1998 speech by former SEC Chairman
Arthur Levitt, this book addresses the why of accounting instead of the how,
providing practitioners and students with a highly readable history of U.S.
corporate accounting. Each chapter explores a controversial accounting topic.
Author Thomas King is treasurer of Progressive Insurance.
SmartPros Newsletter, September 25, 2006
More Than a Numbers Game: A Brief History of Accounting
Author: Thomas A. King
ISBN: 0-470-00873-3
Hardcover 242 pages
September 2006
Inspired by a 1998 speech by former SEC Chairman
Arthur Levitt, this book addresses the why of accounting instead of the how,
providing practitioners and students with a highly readable history of U.S.
corporate accounting. Each chapter explores a controversial accounting topic.
Author Thomas King is treasurer of Progressive Insurance.
SmartPros Newsletter, September 25, 2006
Jensen Comment
The Chief Accountant of the SEC under Arthur Levitt was one of my heroes named
Lynn Turner.
Let me close by citing Harry
S. Truman who said, "I never give them hell; I just tell them the truth and they
think its hell!"
Great Speeches About the State of Accountancy
"20th Century Myths," by Lynn Turner when he was still Chief Accountant at the
SEC in 1999 ---
http://www.sec.gov/news/speech/speecharchive/1999/spch323.htm
| It is
interesting to listen to people ask for simple, less complex
standards like in "the good old days." But I never hear them ask for
business to be like "the good old days," with smokestacks rather
than high technology, Glass-Steagall rather than Gramm-Leach, and
plain vanilla interest rate deals rather than swaps, collars, and
Tigers!! The bottom line is—things have changed. And so have people.
Today, we have enormous pressure on CEO’s and
CFO’s. It used to be that CEO’s would be in their positions for an
average of more than ten years. Today, the average is 3 to 4 years.
And Financial Executive Institute surveys show that the CEO and CFO
changes are often linked.
In such an environment, we in the auditing
and preparer community have created what I consider to be a
two-headed monster. The first head of this monster is what I call
the "show me" face. First, it is not uncommon to hear one say, "show
me where it says in an accounting book that I can’t do this?" This
approach to financial reporting unfortunately necessitates the level
of detail currently being developed by the Financial Accounting
Standards Board ("FASB"), the Emerging Issues Task Force, and the
AICPA’s Accounting Standards Executive Committee. Maybe this isn’t a
recent phenomenon. In 1961, Leonard Spacek, then managing partner at
Arthur Andersen, explained the motivation for less specificity in
accounting standards when he stated that "most industry
representatives and public accountants want what they call
‘flexibility’ in accounting principles. That term is never clearly
defined; but what is wanted is ‘flexibility’ that permits greater
latitude to both industry and accountants to do as they please." But
Mr. Spacek was not a defender of those who wanted to "do as they
please." He went on to say, "Public accountants are constantly
required to make a choice between obtaining or retaining a client
and standing firm for accounting principles. Where the choice
requires accepting a practice which will produce results that are
erroneous by a relatively material amount, we must decline the
engagement even though there is precedent for the practice desired
by the client."
We create the second head of our monster
when we ask for standards that absolutely do not reflect the
underlying economics of transactions. I offer two prime examples.
Leasing is first. We have accounting literature put out by the FASB
with follow-on interpretative guidance by the accounting
firms—hundreds of pages of lease accounting guidance that, I will be
the first to admit, is complex and difficult to decipher. But it is
due principally to people not being willing to call a horse a horse,
and a lease what it really is—a financing. The second example is
Statement 133 on derivatives. Some people absolutely howl about its
complexity. And yet we know that: (1) people were not complying with
the intent of the simpler Statements 52 and 80, and (2) despite the
fact that we manage risk in business by managing values rather than
notional amounts, people want to account only for notional amounts.
As a result, we ended up with a compromise position in Statement
133. To its credit, Statement 133 does advance the quality of
financial reporting. For that, I commend the FASB. But I believe
that we could have possibly achieved more, in a less complex
fashion, if people would have agreed to a standard that truly
reflects the underlying economics of the transactions in an unbiased
and representationally faithful fashion.
I certainly hope that we can find a way to
do just that with standards we develop in the future, both in the
U.S. and internationally. It will require a change in how we
approach standard setting and in how we apply those standards. It
will require a mantra based on the fact that transparent, high
quality financial reporting is what makes our capital markets the
most efficient, liquid, and deep in the world. |
In her notes compiled in 1979, Professor Linda
Plunkett of the College of Charleston S.C., calls accounting the "oldest
profession"; in fact, since prehistoric times families had to account for
food and clothing to face the cold seasons. Later, as man began to trade, we
established the concept of value and developed a monetary system. Evidence of
accounting records can be found in the Babylonian Empire (4500 B.C.), in
pharaohs' Egypt and in the Code of Hammurabi (2250 B.C.). Eventually, with the
advent of taxation, record keeping became a necessity for governments to sustain
social orders.
James deSantis, A BRIEF HISTORY OF ACCOUNTING: FROM PREHISTORY TO
THE INFORMATION AGE ---
http://www.ftlcomm.com/ensign/historyAcc/ResearchPaperFin.htm
Origins of Double Entry Accounting are Unknown
- 1300s A.D. crusades opened the Middle East and
Mediterranean trade routes
- Venice and Genoa became venture trading centers
for commerce
- 1296 A.D. Fini Ledgers in Florence
- 1340 City of Massri Treasurers Accounts are in
Double Entry form.
- 1494 Luca Pacioli's Summa de Arithmetica
Geometria Proportionalita (A Review of Arithmetic, Geometry and Proportions)
Recall that double entry bookkeeping supposedly evolved
in Italy long before it was put into algebraic form in the book Summa by
Luca Pacioli
. As a result the English term "Debit" really has a Latin origin.
You can read the following at
http://www.wikiverse.org/debit
**************
Debit is an accounting and bookkeeping term that comes from the Latin word
debere which means "to owe." The opposite of a debit is a credit. Debit is
abbreviated Dr while credit is abbreviated Cr.
**************
December 13, 2005 message from Robert Bowers
[M.Robert.Bowers@WHARTON.UPENN.EDU]
In the 14th Century, the Phoenicians sent trading
ships to Cathay (China) to trade for silk. Problem was, if a ship sank, the
merchant prob sank (bankrupt) with it. So the merchants pooled their
resources so if a ship sank no one merchant lost everything. Along with
this, an Italian Count named Paole (seriously) set up a system of
recordkeeping to keep track of the ventures. In this system, he created two
registers, a Debit Register (DR), and a Credit Register (CR)
I'll bet 95% of all CPA's don't know that which
makes me .... a trivia freak?
December 16, 2005 message from Robert B Walker
[walkerrb@ACTRIX.CO.NZ]
Luca Pacioli did not invent double entry
book-keeping. The rudiments of double entry book-keeping (DEBK) can be found
in Muslim government administration in the 10th Century. (See Book-keeping
and Accounting Systems in a tenth Century Muslim Administrative Office by
Hamid, Craig & Clark in Accounting, Business & Financial History Vol 3 No 5
1995).
As I understand it Pacioli saw the technique being
used by Arab traders and adapted and codified the technique allowing it to
spread to Northern Europe where it became a* key component in Western
economic dominance in the last 500 years.
This is logical if you think about it. DEBK is the
greatest expression of applied algebra – that Arab word betraying the origin
of the particular mathematical technique in which the world’s duality is
reflected.
RW
* but not the key component as Werner Sombart would
have it. But then his reason for wanting that to be was his extreme anti-semitism
… but that is another story.
December 13, 2005 reply from Earl Hall
[earl@PERSPLAN.COM]
From thefreedictionary.com
DR = Debit [Middle English debite, from Latin
dbitum, debt; see debt.]
CR=Credit [French, from Old French, from Old
Italian credito, from Latin crditum, loan, from neuter past participle of
crdere, to entrust; see kerd- in Indo-European roots.]
Who am I to argue with a free dictionary? The
answer is worth what I paid.
Accountancy and the da Vinci Code
April 12, 2007 message from Barry Rice
[brice@LOYOLA.EDU]
From the April 11 Brisbane Times:
Forgotten magic manual contains original da Vinci
code
AFTER lying almost untouched in the vaults of an Italian university for 500
years, a book on the magic arts written by Leonardo da Vinci's best friend
and teacher has been translated into English for the first time.
The world's oldest magic text, De viribus
quantitatis (On the Powers of Numbers), was penned by Luca Pacioli, a
Franciscan monk who shared lodgings with da Vinci.
Continued at
http://www.brisbanetimes.com.au/articles/2007/04/10/1175971101054.html
.
E. Barry Rice, MBA, CPA
Director, Instructional Services
Emeritus Accounting Professor
Loyola College in Maryland
BRice@Loyola.edu
410-617-2478
www.barryrice.com
Facebook me!
http://www.facebook.com/p/Barry_Rice/20102311
The following is a controversial quotation from
http://www.cbs.dk/staff/hkacc/BOOK-ART.doc
"The power of double-entry bookkeeping has been
praised by many notable authors throughout history. In Wilhelm Meister, Goethe
states, "What advantage does he derive from the system of bookkeeping by
double-entry! It is among the finest inventions of the human mind"...
Werner Sombart, a German economic historian, says, "... double-entry
bookkeeping is borne of the same spirit as the system of Galileo and
Newton" and "Capitalism without double-entry bookkeeping is simply
inconceivable. They hold together as form and matter. And one may indeed doubt
whether capitalism has procured in double-entry bookkeeping a tool which
activates its forces, or whether double-entry bookkeeping has first given rise
to capitalism out of its own (rational and systematic) spirit".
If, for a moment, one considers the credibility
crisis of practical accounting, it would be quite impossible to dismiss the
following paradox: the conflict between the enthusiastic praise of the
system's strength on the one hand, and on the other, the many financial
failures in the real world. How can such a powerful system, even when applied
meticulously, still result in disasters? Although it is hardly necessary to
argue more in favour of double-entry book-keeping, I still want to underline
the two qualities of the system which I find are valid explanations of the
system's very important and world-wide role in financial development for five
centuries.
The Logic of Double-Entry Bookkeeping, by Henning
Kirkegaard
Department of Financial & Management Accounting
Copenhagen Business School
Howitzvej 60
Along this same double-entry thread I might mention my mentor at Stanford.
Nobody I know holds the mathematical wonderment of double-entry and historical
cost accounting more in awe than Yuji Ijiri. For example, see Theory of
Accounting Measurement, by Yuji Ijiri (Sarasota: American Accounting
Association Studies in Accounting Research No. 10, 1975).
Dr.
Ijirii also extended the concept to triple-entry bookkeeping in (Sarasota:
Triple-Entry Bookkeeping and Income Momentum
American Accounting Association Studies in Accounting Research No. 18, 1982).
http://accounting.rutgers.edu/raw/aaa/market/studar.htm tm
Also see the following:
Brush up your Shakespeare:
Medieval manuscripts to hit Internet
Stanford University
Libraries, the University of Cambridge and
Corpus Christi College, Cambridge, will make
hundreds of medieval manuscripts, dating
from the sixth through the 16th centuries,
accessible on the Internet.
"Medieval manuscripts to hit Internet,"
Stanford Report, July 13, 2005 ---
http://news-service.stanford.edu/news/2005/july13/parker-071305.html
A summary of the medieval times and
literature is available at
http://en.wikipedia.org/wiki/Medieval
Brush up your Shakespeare:
Medieval manuscripts to hit Internet
Stanford University
Libraries, the University of Cambridge and
Corpus Christi College, Cambridge, will make
hundreds of medieval manuscripts, dating
from the sixth through the 16th centuries,
accessible on the Internet.
"Medieval manuscripts to hit Internet,"
Stanford Report, July 13, 2005 ---
http://news-service.stanford.edu/news/2005/july13/parker-071305.html
A summary of the medieval times and
literature is available at
http://en.wikipedia.org/wiki/Medieval
May 28, 2005 reply from Barbara Scofield
[scofield@GSM.UDALLAS.EDU]
Thank you for the notice about the availability of
the medieval manuscripts on the Internet through the project Parker on the
Web at Stanford University. Two manuscripts are currently available, and on
page 11 of the English translation of Matthew Paris's "English History From
1235 to 1273" I have already found references to accounting (see below).
Accountants are still using the principle "under
whatever name it may be called" and entities are still making up new names
for inconvenient economic events in the hopes of avoiding full disclosure.
At this Catholic liberal arts university
Shakespeare is modern, and the medieval world is revered, so I'm interested
in gaining some insight into the medieval worldview.
Barbara W. Scofield, PhD, CPA
Associate Professor of Accounting
University of Dallas
1845 E. Northgate Irving, TX 75062
Braniff 262
scofield@gsm.udallas.edu
Ancient Finance from Harvard Business School
From Jim Mahar's blog on May 17, 2006 ---
http://financeprofessorblog.blogspot.com/
The
HBS
Working Knowledge site has an interesting
article by William Goetzmann on
financial instruments back in the time of the Romans and Greeks.
For instance on checks:
...bankers'
checks written in Greek on papyri appeared in ancient Egypt as far
back as 250 B.C. Papyri preserved well in Egypt thanks to its arid
climate, but Goetzmann thinks it's safe to say such checks changed
hands throughout the Mediterranean world . . . So the whole
tradition of bank checks predates the current era and has its roots
at least in Hellenistic Greek times," he says.
Going Concern and Accrual Accounting Evolved in
the 1500s
- Venture accounting over the life of a venture with
interim statements evolved in The Netherlands
- 1673 Code of Commerce in France requires biannual
balance sheet reporting
- Charge and Discharge Agency Responsibility and
Stewardship Accounting in English trust accounting
Limited liability Corporations (divorced
professional management from ownership shares)
- 1555 A.D. Russia Company
- 1600 A.D. East India Company
- 1670 A.D. Hudson's Bay Company
- England's Joint Stock Companies Act of 1844
required depreciation accounting for railroads, mining, and manufacturing (although the
concept of depreciation dates back to Roman times).
Speculation Fever
Fraud and corruption festered and grew with the trading of joint stock, especially after
1600 A.D. The South Seas Company scandal (reporting stock sales as income and paying
dividends out of capital) led to England's Bubble Act in 1720 A.D. that focused on
misleading accounting practices that helped managers rip off investors, especially by
crediting stock sales to income.
One of the earliest and probably the most famous accounting and
investment scandal was the South Sea Bubble in 1720
From the Harvard University Business School
Sunk in Lucre's Sordid Charms: South Sea Bubble Resources in the Kress
Collection at Baker Library ---
http://www.library.hbs.edu/hc/ssb/
Free online textbooks, cases, and tutorials in accounting, finance,
economics, and statistics ---
http://www.trinity.edu/rjensen/ElectronicLiterature.htm#Textbooks
Laissez-Faire Accounting survived endless debates
and scandals until the Great Depression in 1933
- Much of the debate focused on capital maintenance
(e.g., failure to charge off depreciation and failure to provide for replacement of
operating assets), but governments did not legally impose auditing requirements and
serious GAAP until the U.S. securities laws in the early 1930s. Accountants were
vocal in reform movements, but governments were slow to react with legislation and courts
failed to establish consistent GAAP.
- Creation of the SEC in an effort to regain public
trust in financial reporting and equity investing.
- Many firms did have independent audits and
conformed to the best GAAP traditions of the day (thereby giving
some evidence that Agency Theory works sometimes.) Agency theory
hypothesizes that it is in the best interest of management to contract for protection of
investors and avoid scandalous asymmetries of information.
After 1933, the AICPA and the SEC seriously
attempted to generate accounting standards, enforce accounting standards, and provide
academic justification for promulgated standards.
- ASRs of the SEC
- In a 3-2 vote the SEC followed George O. May's
efforts to mandate external audits of securities traded across state lines in the U.S.
- 1939-1959 A.D.: Accounting standards were
generated by the AICPA's Committee on Accounting Procedure (CAP) that issued Accounting
Research Bulletins (51 ARBs) --- but the tendency was to overlook controversial issues
such as off-balance sheet financing, public disclosure of management forecasts,
price-level accounting, current cost accounting, and exit value accounting.
Controversial items avoided by the CAP included management compensation accounting,
pension accounting, post-employment benefits accounting, and off balance sheet financing
(OBSF). The CAP did very little to restrain diversity of reporting.
- 1960-1972 A.D.: Accounting standards in the
U.S. were generated by the AICPA's Accounting Principles Board (APB) that had more members
than the CAP and a mandate to attack more controversial reporting issues. The APB
attacked some controversial issues but often failed to resolve their own disputes on such
issues as pooling versus purchase accounting for mergers.
- 1972-???? A.D. Accounting standards in the
U.S. were, and still are, being generated by the Financial Accounting Standards Board
(FASB) that has seven members, including required members from industry, academe, and
financial analysts in addition to members from public accountancy. FASB members must
divorce themselves from previous income ties and work full time for the FASB. The
formation of the FASB was a desperation move by CPA's to stave off threatened takeover of
accounting standards by the Federal Government (there were the Moss and Metcalf bills to
do just that under pending legislation in the U.S. House and Senate). Unlike the CAP
and APB, the FASB has a full-time research staff and has issued highly controversial
standards forcing firms to abide by pension accounting rules, capitalization of many
leases, and booking of many previous OBSF items (capital leases, pensions, post-employment
benefits, income tax accounting, derivative financial instruments, pooling accounting,
etc.). The road has been long and hard on some other issues where attempts to issue
new standards (e.g., expensing of dry holes in oil and gas accounting and booking of
employee stock options) have been thwarted by highly-publicized political pressuring by
corporations.
History of the U.S.
Financial Accounting Standards Board (FASB) and earlier
accounting standard setting in the United States ---
http://www.trinity.edu/rjensen/Theory01.htm#AccountingHistory
In 1973 the International
Accounting Standards Committee (IASC) was formed and evolved into the
International Accounting Standards Board IASC) in 1981.
A Timeline of development can be found
at
http://www.trinity.edu/rjensen/FraudRotten.htm#DerivativesFrauds
History
of the
International Accounting Standards Board (IASB) ---
http://www.iasb.org/About+Us/About+the+Foundation/History.htm
A more complete commentary on the history of the IASC and IASB by Paul Pacter
---
http://www.trinity.edu/rjensen/acct5341/speakers/pacter.htm#001
lso see
http://static.managementboek.nl/pdf/9780471726883.pdf
Some of the many, many lawsuits settled by auditing
firms can be found at
http://www.trinity.edu/rjensen/Fraud001.htm
Wow Online Accounting History
Book (Free)
Thank you David A.R. Forrester for providing a great, full-length, and online book:
An Invitation to Accounting History --- http://accfinweb.account.strath.ac.uk/df/contents.html
Note especially Section B2 --- "Rational Administration, Finance And Control
Accounting: the Experience of Cameralism" --- http://accfinweb.account.strath.ac.uk/df/b2.html
Accounting history lecture worth noting --- http://newman.baruch.cuny.edu/digital/saxe/saxe_1978/baxter_79.htm
The for-free IASC comparison study of IAS 39 versus FAS 133 (by Paul
Pacter) at http://www.iasc.org.uk/news/cen8_142.htm
The non-free FASB comparison study of all standards entitled The IASC-U.S.
Comparison Project: A Report on the Similarities and Differences between IASC
Standards and U.S. GAAP
SECOND EDITION, (October 1999) at
http://stores.yahoo.com/fasbpubs/publications.html
In 1999 the Joint Working Group of the Banking
Associations sharply rebuffed the IAS 39 fair value accounting in two white
papers that can be downloaded from http://www.iasc.org.uk/frame/cen3_112.htm.
Also see the Financial Accounting Standards Board (FASB)
and the International Federation of Accountants Committee (IFAC).
Side by Side: IAS 39 Compared with FASB Standards (FAS 133), by Paul Pacter,
as published in Accountancy International Magazine, June 1999 ---
http://www.iasc.org.uk/news/cen8_142.htm
Also note "Comparisons of International IAS Versus FASB Standards" ---
http://www.deloitte.com/dtt/cda/doc/content/pocketiasus.pdf
October 21, 2005 message from Scott Bonacker
[lister@BONACKERS.COM]
I remember a thread or two asking for information
on historical figures or accounting heros or something like that. I couldn't
come up with the right key words to find it by searching the archives
unfortunately.
When I saw this article, I thought this was someone that should be included:
"Mary T. Washington of Chicago stepped bravely beyond race and gender
boundaries in 1943, becoming the first black female certified public
accountant in the United States. Washington, 99 years old when she died in
late July, first opened an accounting practice for African-American clients
in her basement while working on her college degree.
Washington lived and led in a world not yet here, creating what her business
partner later called an "underground railroad" for aspiring black CPAs.
...."
Read the rest at:
http://www.sojo.net/index.cfm?action=magazine.article&issue=soj0511&article=051149
October 21, 2005 reply from Bob Jensen
Hi Scott,
Although there are probably various interesting sites such as those you
mentioned, there are several sites that are of particular interest with
respect to famous accounting practitioners and academics.
The OSU Accounting Hall of Fame
It should be noted that members elected to this Hall of Fame include famous
accountants from around the world ---
http://fisher.osu.edu/acctmis/hall/
U.K. Accounting Hall of Fame
Professors David Otley and Ken Peasnell of the Department of Accounting and
Finance are two of the fourteen founding members of the British Accounting
Association’s Hall of Fame. The ceremony took place at the British
Accounting Association 2004 Annual conference at York in April 2004 ---
http://www.lums.lancs.ac.uk/news/3806/
Michigan State Video Archive
I've not yet seen anything about other accounting Hall of Fame sites.
Michigan State University has a video archive of famous accountants. These
accountants were invited to campus and then taped live. I don't think any of
this footage is available online, but it would be a nice thing to do now
that digitization hardware is so inexpensive. Don Edwards (U. of Georgia)
probably knows more about these videos than anybody else.
A few accountants who became famous in fields other than accounting are
listed at
http://www.educationwithattitude.com/catch/accounting.asp
The above site missed my favorite accounting celebrity John Cleese
The Unofficial Monty Python Website ---
http://www.educationwithattitude.com/catch/accounting.asp
Note especially The Accountancy Shanty (audio) at
http://www.educationwithattitude.com/catch/accounting.asp
Bob Jensen
October 23, 2005 reply from Tom Sentman
[TSentman@MSN.COM]
Here is a historical figure for consideration.
While not a CPA, Luca Pacioli is considered to be the father of accounting.
Although he did not invent dual-entry accounting, he described the system as
we know it today. I always use this question on my tests.
Visit
http://acct.tamu.edu/smith/ethics/pacioli.htm
for more.
Cheers,
Tom Sentman
Question
How does accounting for time differ from accounting for money?
Remember those Taylor
and
Gilbreth time and motion studies in cost accounting.
How has time accounting changed in the workplace (or should change)?
The link below was forwarded by Gregory Morrison at Trinity University
Studies have shown the alarming extent of the
problem: office workers are no longer able to stay focused on one specific task
for more than about three minutes, which means a great loss of productivity. The
misguided notion that time is money actually costs us money.
"Time Out of Mind," by Stefan Klein, The New York Times, March 7,
2008 ---
Click Here
In 1784, Benjamin Franklin composed a satire,
“Essay on Daylight Saving,” proposing a law that would oblige Parisians to
get up an hour earlier in summer. By putting the daylight to better use, he
reasoned, they’d save a good deal of money — 96 million livres tournois —
that might otherwise go to buying candles. Now this switch to daylight
saving time (which occurs early Sunday in the United States) is an annual
ritual in Western countries.
Even more influential has been something else
Franklin said about time in the same year: time is money. He meant this only
as a gentle reminder not to “sit idle” for half the day. He might be
dismayed if he could see how literally, and self-destructively, we take his
metaphor today. Our society is obsessed as never before with making every
single minute count. People even apply the language of banking: We speak of
“having” and “saving” and “investing” and “wasting” it.
But the quest to spend time the way we do money is
doomed to failure, because the time we experience bears little relation to
time as read on a clock. The brain creates its own time, and it is this
inner time, not clock time, that guides our actions. In the space of an
hour, we can accomplish a great deal — or very little.
Inner time is linked to activity. When we do
nothing, and nothing happens around us, we’re unable to track time. In 1962,
Michel Siffre, a French geologist, confined himself in a dark cave and
discovered that he lost his sense of time. Emerging after what he had
calculated were 45 days, he was startled to find that a full 61 days had
elapsed.
To measure time, the brain uses circuits that are
designed to monitor physical movement. Neuroscientists have observed this
phenomenon using computer-assisted functional magnetic resonance imaging
tomography. When subjects are asked to indicate the time it takes to view a
series of pictures, heightened activity is measured in the centers that
control muscular movement, primarily the cerebellum, the basal ganglia and
the supplementary motor area. That explains why inner time can run faster or
slower depending upon how we move our bodies — as any Tai Chi master knows.
Time seems to expand when our senses are aroused.
Peter Tse, a neuropsychologist at Dartmouth, demonstrated this in an
experiment in which subjects were shown a sequence of flashing dots on a
computer screen. The dots were timed to occur once a second, with five black
dots in a row followed by one moving, colored one. Because the colored dot
appeared so infrequently, it grabbed subjects’ attention and they perceived
it as lasting twice as long as the others did.
Another ingenious bit of research, conducted in
Germany, demonstrated that within a brief time frame the brain can shift
events forward or backward. Subjects were asked to play a video game that
involved steering airplanes, but the joystick was programmed to react only
after a brief delay. After playing a while, the players stopped being aware
of the time lag. But when the scientists eliminated the delay, the subjects
suddenly felt as though they were staring into the future. It was as though
the airplanes were moving on their own before the subjects had directed them
to do so.
The brain’s inclination to distort time is one
reason we so often feel we have too little of it. One in three Americans
feels rushed all the time, according to one survey. Even the cleverest use
of time-management techniques is powerless to augment the sum of minutes in
our life (some 52 million, optimistically assuming a life expectancy of 100
years), so we squeeze as much as we can into each one.
Believing time is money to lose, we perceive our
shortage of time as stressful. Thus, our fight-or-flight instinct is
engaged, and the regions of the brain we use to calmly and sensibly plan our
time get switched off. We become fidgety, erratic and rash.
Tasks take longer. We make mistakes — which take
still more time to iron out. Who among us has not been locked out of an
apartment or lost a wallet when in a great hurry? The perceived lack of time
becomes real: We are not stressed because we have no time, but rather, we
have no time because we are stressed.
Studies have shown the alarming extent of the
problem: office workers are no longer able to stay focused on one specific
task for more than about three minutes, which means a great loss of
productivity. The misguided notion that time is money actually costs us
money.
And it costs us time. People in industrial nations
lose more years from disability and premature death due to stress-related
illnesses like heart disease and depression than from other ailments. In
scrambling to use time to the hilt, we wind up with less of it.
Continued in article
March 12, 2008 reply from David Albrecht
[albrecht@PROFALBRECHT.COM]
For those who don't remember these time and motion
studies (about 100 years ago), here is a summary:
http://www.netmba.com/mgmt/scientific/
Pondering your question, I keep coming back to a
humorous story I read in Reader's Digest years ago. A person's car breaks
down and a mechanic with a fine reputation is summoned. The mechanic looks
over the engine, pulls out a screwdriver, and in about three seconds
tightens a screw. The mechanic then hands the driver a bill for several
hundred dollars. The driver complains about paying so much for so little of
the mechanic's time. The mechanic replies that the itemization was $0.10
for the act of tightening the screw, and hundreds of dollars for knowing
what to tighten.
At this time I refrain from saying much about the Empire Club and it's
ability to charge thousands of dollars per hour for the time of its models.
I'm wondering if Governor Spitzer maintained personal financials according
to GAAP, would he have reported his time involvement with Empire Club as a
contingent liability.
Bob, you're retired and on pension, I'm still employed and getting paid.
The time you spend surfing, writing and sharing on AECM is unrecompensed,
but mine is not. Yet, you provide much more value to AECM than I.
David Albrecht
How Foucault, Derrida, Deleuze, & Co. Transformed the Intellectual Life of
the United States
"French Theory," by Scott McLemee, Inside Higher Ed, April 17, 2008 ---
http://www.insidehighered.com/views/2008/04/16/mclemee
Last week, while rushing to finish up a review of
Francois Cusset’s French Theory: How Foucault, Derrida, Deleuze, & Co.
Transformed the Intellectual Life of the United States (University of
Minnesota Press), I heard that Stanley Fish had just published a
column about the book for The New York Times.
Of course the only sensible thing to do was to ignore this development
entirely. The last thing you need when coming to the end of a piece of work
is to go off and do some more reading. The inner voice suggesting
that is procrastination disguised as conscientiousness. Better, sometimes,
to trust your own candlepower — however little wax and wick you may have
left.
Once my own cogitations were complete (the piece
will run in the next issue of Bookforum), of course, I took a look at the
Times Web site. By then, Fish’s column had drawn literally hundreds of
comments. This must warm some hearts in Minnesota. Any publicity is good
publicity as long as they spell your name right — so this must count as
great publicity, especially since French Theory itself won’t actually be
available until next month.
But in other ways it is unfortunate. Fish and his
interlocutors reduce Cusset’s rich, subtle, and paradox-minded book (now
arriving in translation) into one more tale of how tenured pseudoradicalism
rose to power in the United States. Of course there is always an audience
for that sort of thing. And it is true that Cusset – who teaches
intellectual history at the Institute d’Etudes Politiques and at Reid
Hall/Columbia University, in Paris – devotes some portions of the book to
explaining American controversies to his French readers. But that is only
one aspect of the story, and by no means the most interesting or rewarding.
When originally published five years ago, the cover
of Cusset’s book bore the slightly strange words French Theory. That the
title of a French book was in English is not so much lost in translation as
short-circuited by it. The bit of Anglicism is very much to the point: this
is a book about the process of cultural transmission, distortion, and
return. The group of thinkers bearing the (American) brand name “French
Theory” would not be recognized at home as engaged in a shared project, or
even forming a cohesive group. Nor were they so central to cultural and
political debate there, at least after the mid-1970s, as they were to become
for academics in the United States. So the very existence of a phenomenon
that could be called “French Theory” has to be explained.
To put it another way: the very category of “French
Theory” itself is socially constructed. Explaining how that construction
came to pass is Cusset’s project. He looks at the process as it unfolded at
various levels of academic culture: via translations and anthologies, in
certain disciplines, with particular sponsors, and so on. Along the way, he
recounts the American debates over postmodernism, poststructuralism, and
whatnot. But those disputes are part of his story, not the point of it.
While offering an outsider’s perspective on our interminable culture wars,
it is more than just a chronicle of them..
Instead, it would be much more fitting to say that
French Theory is an investigation of the workings of what C. Wright Mills
called the “cultural apparatus.” This term, as Mills defined it some 50
years ago, subsumes all the institutions and forms of communication through
which “learning, entertainment, malarky, and information are produced and
distributed ... the medium by which [people] interpret and report what they
see.” The academic world is part of this “apparatus,” but the scope of the
concept is much broader; it also includes the arts and letters, as well as
the media, both mass and niche.
The inspiration for Cusset’s approach comes from
the French sociologist Pierre Bourdieu, rather than Mills, his distant
intellectual cousin from Texas. Even so, the book is in some sense more
Millsian in spirit than the author himself may realize. Bourdieu preferred
to analyze the culture by breaking it up into numerous distinct “fields” –
with each scholarly discipline, art form, etc. constituting a separate
sub-sector, following more or less its own set of rules. By contrast, Cusset,
like Mills, is concerned with how the different parts of American culture
intersect and reinforce one another, even while remaining distinct. (I
didn’t say any of this in my review, alas. Sometimes the best ideas come as
afterthoughts.)
The boilerplate account of how poststructuralism
came to the United States usually begins with visit of Lacan, Derrida, and
company to Johns Hopkins University for a conference in 1966 – then never
really imagines any of their ideas leaving campus. By contrast, French
Theory pays attention to how their work connected up with artists,
musicians, writers, and sundry denizens of various countercultures. Cusset
notes the affinity of “pioneers of the technological revolution” for certain
concepts from the pomo toolkit: “Many among them, whether marginal academics
or self-taught technicians, read Deleuze and Guattari for their logic of
‘flows’ and their expanded definition of ‘machine,’ and they studied Paul
Virilio for his theory of speed and his essays on the self-destruction of
technical society, and they even looked at Baudrillard’s work, in spite of
his legendary technological incompetence.”
And a particularly sharp-eyed chapter titled
“Students and Users” offers an analysis of how adopting a theoretical
affiliation can serve as a phase in the psychodrama of late adolescence (a
phase of life with no clearly marked termination point, now). To become
Deleuzian or Foucauldian, or what have you, is not necessarily a step along
the way to the tenure track. It can also serve as “an alternative to the
conventional world of career-oriented choices and the pursuit of top grades;
it arms the student, affectively and conceptually, against the prospect of
alienation that looms at graduation under the cold and abstract notions of
professional ambition and the job market....This relationship with knowledge
is not unlike Foucault’s definition of curiosity: ‘not the curiosity that
seeks to assimilate what it is proper for one to know, but that which
enables one to get free of oneself’....”
Much of this will be news, not just to Cusset’s
original audience in France, but to readers here as well. There is more to
the book than another account of pseudo-subversive relativism and neocon
hyperventilation. In other words, French Theory is not just another Fish
story. It deserves a hearing — even, and perhaps especially, from people who
have already made up their minds about “deconstructionism,” whatever that
may be.
You can read more about Michael Foucault at
http://en.wikipedia.org/wiki/Michel_Foucault
You can read about post-structuralism at
http://en.wikipedia.org/wiki/Post-structuralism
You can read about post-modernism at
http://en.wikipedia.org/wiki/Postmodernism
Jensen Comment
It's pretty difficult to trace these French theories to accounting research and
scholarship, but the leading accounting professor trying to do so is probably my
former doctoral student Ed Arrington who even moved to Europe for a while to
carry on his studies in these theories ---
http://www.uncg.edu/bae/acc/accfacul.htm#arrington
A Google search turns up some of his publications in this area as they relate
to accounting, economics, and business. His publications also branch off into
other areas since Ed has wide ranging interests and is an excellent speaker as
well as a researcher and writer. His thesis was an application of the Analytic
Hierarchy Process in decision modelling, but he's expanded well beyond that
since he got his PhD.
http://en.wikipedia.org/wiki/Analytic_Hierarchy_Process
For years my interests and publications were in AHP, although in latter years I
was mostly critical of Saaty's precious and arbitrary eigenvector mathematical
scaling (but I was not critical of Ed's thesis).
See Accounting History Publications list 1998 ---
http://findarticles.com/p/articles/mi_qa3933/is_199905/ai_n8843886
A substantial listing of history papers is available from the Institute of
Chartered Accountants ---
http://www.icaew.co.uk/library/index.cfm?AUB=TB2I_27022
Accounting Historians Journal ---
http://accounting.rutgers.edu/raw/aah/
The University of Sydney's Accounting Foundation provides some accounting
history publications ---
http://www.econ.usyd.edu.au/af /
History of Information Technology in Auditing (EDP Auditing) ---
http://en.wikipedia.org/wiki/History_of_information_technology_auditing
For additional information on the history of accountancy and the accountancy
profession see
http://en.wikipedia.org/wiki/Accounting
Islamic and Social Responsibility Accounting
Islamic Accounting ---
http://en.wikipedia.org/wiki/Islamic_accounting
The Islamic Accounting Web ---
http://www.iiu.edu.my/iaw/
The Differences of Conventional and Islamic Accounting ---
Click Here
"Islamic Accounting: Challenges, Opportunities and Terror,"
AccountingWeb, October 5, 2006 ---
http://www.accountingweb.com/cgi-bin/item.cgi?id=102651
Recent events, from the start of Ramadan, to the
Pope’s controversial remarks about Islam, to the discovery of a new tape by
two of the September 11 attackers, to the release of Bob Woodward’s latest
book, have once more made Islam a topic of conversation. Beyond the
headlines, however, exists a complex religious and social system that
affects far more people than just Muslims. Islamic finance, particularly
Islamic banking, insurance and accounting, is playing a growing role around
the globe, especially in the business world.
Islamic accounting is generally defined as an alternative accounting system
which aims to provide users with information enabling them to operate
businesses and organizations according to Shariah, or Islamic law. With
little doubt, the greatest challenges to Islamic accounting and finance in
the United States stem from a lack of knowledge and understanding of Islam
and the intricacies of its financial laws and concerns regarding terrorism,
combined with the U.S. regulatory framework and guiding principles of
American business. The Muslim and Islamic financial markets within the U.S.
and around the world, currently represent an enormous opportunity for those
willing to overcome these challenges.
Islam & Islamic Financial Laws
“To professional accountants who have been
brought-up on the idea of accounting as an ‘objective’, technical and
value-free discipline, the idea of attaching a religious adjective to
accounting may seem embarrassing, unprofessional and even dangerous,” Dr.
Shahul Hameed bin Mohamed Ibrahim says in Islamic Accounting – A Primer.
Both conventional and Islamic accounting provide
information and define how that information is measured, valued, recorded
and communicated. Conventional accounting provides information about
economic events and transactions, measuring resources in terms of assets and
liabilities, and communicating that information through financial statements
users, typically investors, rely on to make decisions regarding their
investments. Islamic accounting, however, identifies socio-economic events
and transactions measured in both financial and non-financial terms and the
information is used to ensure Islamic organizations of all types adhere to
Shariah and achieve the socio-economic objectives promoted by Islam. This is
not to say, or imply, Islamic accounting is not concerned with money, rather
it is not concerned only with money.
Islamic accounting, in many ways, is more holistic.
Shariah prohibits interest-based income or usury and also gambling, so part
of what Islamic accounting does is help ensure companies do not harm others
while making money and achieve an equitable allocation and distribution of
wealth, not just among shareholders of a specific corporation but also among
society in general. Of course, as with conventional accounting, this is not
always achieved in practice, as an examination of the wide variances in
wealth among the populations of Arab nations, particularly those with
majority Muslim populations shows.
In addition, because a significant part of
operating within Shariah means delivering on Islam’s socio-economic
objectives, Islamic organizations have far wider interests and engage in
more diverse activities than their non-Islamic counterparts.
Concerns About Terrorism
The diverse activities and interests organizations
pursue under Shariah is a cause for concern when applying conventional
accounting to Islamic organizations. After all, conventional accounting can
be used to disguise unethical and even illegal activities within the very
organizations they were intended to provide information about. Imagine how
easy it is to overlook or just not identify such information when employing
an accounting system not designed for use with the type of organization it
is being applied to.
In the past, the issues raised by this mismatch
focused on the ability of users beyond the Muslim world to make appropriate
decisions regarding investments. Since September 11, 2001, however, the
concern has changed from the potential loss of investment to the possibility
of supporting terrorism.
This concern is particularly significant for
non-profit organizations involved in providing humanitarian relief outside
the U.S.. Fortunately, the U.S. Department of the Treasury (DoT) has issued
updated Anti-Terrorist Financing Guidelines: Voluntary Best Practices for
U.S.-based Charities (Guidelines).
“The abuse of charities by terrorist organizations
is a serious and urgent matter, and the Guidelines reinforce the need
for the U.S. Government and the charitable sector alike, to keep this
challenge at the forefront of our complementary efforts,” Pat O’Brien,
Assistant Secretary for the Treasury’s Office of Terrorist Financing and
Financial Crime, said in a statement announcing the updated guidelines. The
Treasury Department is committed to protecting and enabling legitimate and
vital charity worldwide, and will continue to work with the sector to
advance our mutual goals.”
The Guidelines urge charities to take a
proactive, risk-based approach to protecting against illicit abuse and are
intended to be applied by those charities vulnerable to such abuse, in a
manner commensurate with the risks they face and the resources with which
they work. At the request of the charitable sector, the Guidelines
contain extensive anti-terrorist financing guidance, as well as guidance on
sound governance and financial practices that helps prevent the exploitation
of charities.
Regulatory Issues
The regulatory environment Islamic individuals and
organizations are most concerned with, considering the current political
climate, are those relating to anti-terrorism and anti-money laundering. Yet
the tensions arising from regulatory requirements within the U.S. related to
American business practices often prove more difficult to resolve.
It is in trying to balance the expectations of
distinct business cultures that the differences between conventional and
Islamic accounting are most notable. For instance, depending upon the type
of transactions the organizations are engaged in, the roles,
responsibilities and rights assigned to each party can be contradictory and
even in direct conflict. In some situations, such as transactions involving
private equity, venture capital, profit sharing and liquidations,
organizations and individuals employing conventional accounting may actually
find they prefer Islamic accounting. Other issues, such as those related to
taxation, require significant effort to resolve. The inherent flexibility of
Shariah is a benefit under these circumstances, since the complexity of the
American tax code is highly inflexible.
The number of Muslim consumers, investors and
business owners has grown along with the Muslim American population which is
currently estimated to be between six and seven million. Although demand for
Islamic financial products and services has increased, both the supply and
the number of providers remain insufficient. It should also be noted that
Islamic orthodoxy, expressed as the desire to implement Shariah as the sole
legal foundation of a nation, is actually associated with progressive
economic principles, including increasing government for the poor, reducing
income inequality and increasing government ownership of industries and
industries, especially in the poorer nations of the Muslim world.
“While it is common to associate traditional
religious beliefs with conservative political stances on a wide range of
issues, this is only partly true,” said Robert V. Robinson, Chancellor’s
Professor and chair of Indiana University’s Department of Sociology. “The
Islamic orthodox are more conservative on issues having to do with gender,
sexuality and the family, but more liberal or left on economic issues.
Islamic Accounting Web ---
http://www.iiu.edu.my/iaw/
The Islamic Accounting Website is a project of the
Department of Accounting, Kulliyah of Economics and Management Sciences,
International Islamic University Malaysia, Kuala Lumpur. This project is
under the direction of Dr. Shahul Hameed bin Mohamed Ibrahim, Assistant
Professor and the current Head of the Department. The philosophy of the
University is to Islamize knowledge to solve the crisis in Muslim thinking
brought about by the secularization of knowledge and furthermore
contributing as a centre of educational excellence to revive the dynamism of
the Muslim Ummah in knowledge, learning and the professions. The Department
of Accounting is fully committed to this vision and strives to Islamicise
Accounting.
"ISLAMIC ACCOUNTING STANDARDS," by Shadia Rahman ---
http://islamic-finance.net/islamic-accounting/acctg5.html
Sharing site of Dr Shahul Hameed Bin Hj Mohamed Ibrahim ---
http://islamic-finance.net/islamic-accounting/
articles by the author
articles by other scholars
Forthcoming
Articles on Islamic Accounting
Alternative (conventional accounting) rules may, for
the individual citizen, mean the difference between employment and unemployment,
reliable products and dangerous ones, enriching experiences and oppressive ones,
stimulating work environments and dehumanising ones, care and compassion for the
old and sick versus intolerance and resentment.
Tony Tinker, 1985
Financial Reporting should provide information that
is useful to present and potential investors and creditors and other users in
making rational investment, credit and similar decisions ...(through the
provision of information that will help them to assess)..... the amount, timing
and uncertainty of net cash inflows to the related enterprise
FASB Concept Number 1 of the Conceptual Framework, 1978
"Bear Stearns: SEC Can't Serve
Brokerage Clients and Shareholders Simultaneously," by Tom Selling, The
Accounting Onion, March 19, 2008 ---
http://accountingonion.typepad.com/theaccountingonion/2008/03/the-sec-has-bee.html
The
SEC has been one of the most prominent
and well-respected of federal agencies
during most of its history. Strict
adherence to a focused mission on
disclosure in regards to the regulation
of financial reporting by public
companies has been its trademark.
Having said that, however, the SEC has
been far from pristine in implementing a
disclosure-only policy. Certain actions
could be characterized by some as a form
of “merit regulation”—some companies may
have been unfairly subject to undue
scrutiny, and others may have received
an undeserved pass. The SEC has also
used its broad powers to make rules
requiring added disclosures in some
circumstances, and allowing abbreviated
disclosures in others. For example, the
SEC has added disclosure requirements to
the offering documents of “blank check”
companies, and also provided disclosure
accommodations to smaller and foreign
companies.
But, if some were to criticize the SEC
for merit regulation, cavils of this
sort are on the fringes of SEC
activity. And, most important to the
criticisms I'm fixin' to deliver, they
all relate to the regulatory activities
concerning disclosures by
companies to the SEC. But now, an SEC
official -- the chair, no less -- has
seen fit to make gratuitous disclosures
for certain
public companies.
Here's the situation. Last Tuesday
(March 11, 2008), SEC Chair Christopher
Cox made the following statement to
reporters: "We have a good deal of
comfort about the capital cushions that
these firms [the five largest investment
banks, which included Bear Stearns] have
been on." (http://www.cnbc.com/id/23576630)
At the time,
Bear's stock was at $60, a five-year
low, and just the day before, Bear
issued a press release denying rumors of
liquidity problems. The stock tumbled
to $30 early Friday, and over the
weekend, JP Morgan struck a deal to buy
Bear Stearns for a paltry $2 per share.
(For reasons I don't want to cover here,
the current market price as I write this
is around $5 per share.)
It's a serious thing that investors may
have relied on false and misleading
information issued by
Bear Stearns, but it is quite another
for the SEC to have issued information
for Bear
Stearns. (I am trying to making a
principled statement here, so that fact
that investors who relied on that
information got taken to the cleaners is
notable, though not the sole basis of my
critique.) Heretofore, a company either
complies with the disclosure rules, or
it doesn’t; the SEC doesn’t make
congratulatory announcements for
companies it finds to have been
exemplary compliers, disclosers, or what
have you. But if you fail to comply,
then that’s when the SEC will tell the
world about you; there are thousands of
examples of the consistent
implementation of this policy.
I imagine that Cox would defend himself
on the basis that the SEC is in a
curious position with respect to
companies like Bear Stearns. One of the
many jobs given to the SEC by Congress
is to monitor the “capital adequacy” of
broker-dealers. The objective is to
provide a form of protection for the
assets of clients who have deposited
cash and securities with
broker-dealers. Thus, the SEC is
serving two masters, having very
different interests in Bear Stearns:
clients and shareholders.
When Cox chose to speak about Bear
Stearns last Tuesday, both groups of
Bear Stearns stakeholders were
listening, and at least some in each
group responded with diametrically
opposite courses of action:
• Some clients of Bear may have
been calmed, but too many disregarded
Cox’s assurances, took their money and
ran;
•
Some investors on the verge of selling
their shares had a change of mind -- and
some may have even bought stock based on
his assurances.
Cox should have known that he was
unavoidably sending a signal of
encouragement to jittery investors who
were trying to decide whether or not to
buy, hold, or sell shares of Bear
Stearns. If SEC history is any guide,
it was simply not appropriate for him to
have done so. Just as a real estate
agent cannot claim to represent parties
on both sides of a transaction, the SEC
cannot claim to be "the investor's
advocate" at the same moment they are
functioning as the public relations
spokesperson for the investee. It would
have been far better to have left the
public relations role to other
government officials.
The question of how much SEC credibility
has been lost is difficult for me to
judge. Assuming this were an isolated
instance, it would be significant. But
seen as the latest in a series of
questionable actions reflecting the
SEC's stance on investor protection, the
Bear Stearns case is just more
confirming evidence of an altered SEC
culture. I am sad to say that the
process of restoring credibility to a
once peerless agency cannot begin until
there is a new chair.
Bob Jensen's threads on the controversies of accounting standards ---
http://www.trinity.edu/rjensen/Theory01.htm#MethodsForSetting
Jensen Comment
As pointed out above, Islamic accounting is really in the realm of social
accounting by whatever name you want to call it. It is primarily concerned with
accounting for all constituencies without investors and creditors necessarily
being the primary constituencies. Certainly investors and creditors must provide
capital. But employees must provide their labor, customers must purchase
outputs, suppliers must provide the inputs, and society must provide an
environment within which all constituencies are to flourish.
See
http://en.wikipedia.org/wiki/Social_Responsibility
Also see
http://en.wikipedia.org/wiki/AccountAbility_%28Institute_of_Social_and_Ethical_AccountAbility%29
The problem with Islamic accounting is that it has never delved
deeply into the details of accounting for complex contracts of structured
financing, derivative financial instruments, hedging, collateralized debt,
convertible debt, and intangibles accounting. Hence it is not yet a place where
one goes for learning about such contracting and theories of accounting for such
contracts. It is naive to think such complex contracting should be banned in
Islam, because business leaders in Islam must manage risks and hedge just like
everybody else.
Also see
http://www.trinity.edu/rjensen/Theory01.htm#TripleBottom
XBRL: The Next Big Thing
January 14, 2008 message
from Dennis Beresford
[dberesfo@TERRY.UGA.EDU]
Here's a link to a very interesting recent speech by SEC Chairman Chris
Cox -
http://www.sec.gov/news/speech/2008/spch011008cc.htm.
Among other things he says:
"So to sum up, this is what you need to know from the SEC's standpoint:
IFRS is coming. XBRL is coming. And mutual recognition is coming."
From this and many other recent activities at the SEC, FASB, Congress
and elsewhere, it appears that both IFRS and XBRL are nearer than some
might have imagined. And educators should be taking these developments
into consideration now, or may be left behind.
Denny Beresford
SEC releases new XBRL analytical tool
XBRL US, Inc., the nonprofit consortium dedicated to
the adoption of XBRL (eXtensible Business Reporting Language), a technology
standard for the reporting of financial and business information in the U.S.,
strongly supports the Securities and Exchange Commission's launch of an online,
interactive tool that allows investors to instantly extract, compare, and
analyze executive compensation for the largest 500 companies in the United
States . . . This tool relies on the power of XBRL for the compensation data and
underscores the flexibility and usefulness of "tagged" data. The SEC
announcement comes a year after it adopted stricter rules on executive pay
disclosure that now require more detail in annual shareholder proxy statements.
The new application uses XBRL data created by the SEC and allows investors and
researchers to immediately create reports showing salary, bonus, stock awards,
option awards, non-equity incentive plan compensation, change in pension value,
and other compensation figures for executives at the top 500 companies.
"SEC releases new XBRL analytical tool," AccountingWeb, January 10, 2008
---
http://www.accountingweb.com/item/104442
Bob Jensen's threads on XBRL are at
http://www.trinity.edu/rjensen/XBRLandOLAP.htm
Bob Jensen's video demos of XBRL are at
http://www.cs.trinity.edu/~rjensen/video/Tutorials/
December 6, 2005 message from Dennis Beresford [dberesfo@terry.uga.edu]
National Conference on Current SEC and PCAOB
Developments. His talk is available at:
http://www.sec.gov/news/speech/spch120505cc.htm
He had three main messages:
1. Accounting rules need to be simplified. "The
accounting scandals that our nation and the world have now mostly
weathered were made possible in part by the sheer complexity of the
rules." "The sheer accretion of detail has, in time, led to one of the
system's weaknesses - its extreme complexity. Convolution is now
reducing its usefulness."
2. The concentration of auditing services in
the Big 4 "quadropoly" is bad for the securities markets. The SEC will
try to do more to encourage the use of medium size and smaller firms
that receive good inspection reports from the PCAOB.
3. The SEC will continue to push XBRL. "The
interactive data that this initiative will create will lead to vast
improvements in the quality, timeliness, and usefulness of information
that investors get about the companies they're investing in."
A very interesting talk - one that seems to
promise a high level of cooperation with the accounting profession.
Denny
Bob Jensen's threads on XBRL are at
http://www.trinity.edu/rjensen/XBRLandOLAP.htm
Two XBRL Videos
XBRL is no longer something we only play with in academe. It is now
available to investors around the world, although it may take a while for
some companies to add the XBRL tags to their financial statements. Some
things that are now being done in XBRL such as time graphs and ratio graphs
can be done with things other than XBRL. What XBRL does, however, is make
it possible to:
(1) Compare different companies in a Web browser
(2)
Perform customized analyses if the XBRL statements are downloaded into
Excel
(3) Conduct easy searches that do not yield thousands of unwanted and
extraneous hits
Bob Jensen's New Video Tutorial on XBRL (about 30
minutes)
It's the XBRLdemos2005.wmv file at
http://www.cs.trinity.edu/~rjensen/video/Tutorials/
But first read
the following and watch the KOSDAQ video before watching the above video.
Question
What are the two most significant events in the history of accounting,
financial reporting, and financial statement analysis?
Answers
Double Entry Bookkeeping and
XBRL
The origins of double entry bookkeeping are unknown.
It goes back over 100 years before
Luca Pacioli
made it famous by
algebraically describing it in the world's first algebra book called
Summa written in 1494. Pacioli's basic equation A=L+E simply shows
how recorded asset values in total equal the double-entry sum of creditor
liabilities plus owner equities in those assets. For over 500 years
accounting disputes mainly lie in defining the A, L, and E concepts and
measuring them in financial statements. Pacioli gave us the algebra
without the crucial and operational definitions of terms. Bob Jensen's
brief summary of the history of accounting is at
http://www.trinity.edu/rjensen//theory/00overview/theory01.htm
XBRL stands for eXtensible Business Reporting Language in
XML that can now be interpreted by every Web browser such as Microsoft's
Internet Explorer. In the future, virtually every all academic
disciplines such as Chemistry, Physics, and History will probably develop
their own taxonomies for XML reporting on the Web.
Hence, we one day may have XCHEM, XPHYS, and XHIST
eXtensible reporting languages.
Whereas the famous HTML tags on data are not extensible and
are more or less fixed in scope and time, XML extensible meta-tags will
become the world's most popular way of creating customized "meta-tags" that
attach to virtually every piece of Web data and describe attributes of each
piece of data. The history of data tags and meta-tags is briefly
outlined at
http://www.trinity.edu/rjensen/XBRLandOLAP.htm
I also highly recommend the XBRL history and news site at XBRL headquarters
at http://www.xbrl.org/Home/
XBRL is a taxonomy for XML meta-tags to be placed on
virtually every number in a set of financial statements. For over a
decade, efforts have been made by huge companies and accounting firms to
develop standardized XBRL tags for key taxonomies in accounting. These
taxonomies may vary as to a particular set of accounting generally accepted
accounting principles (GAAP) such as International GAAP or US GAAP.
Once a company or user selects which GAAP taxonomy to use, it's financial
statements can be "marked up" with XBRL meta-tags that facilitate
comparative financial statement analysis. Users may also take any set
of financial statements and add tags for a chosen set of GAAP tags.
For example, see Drag and Tag from Rivet Corporation ---
http://www.rivetsoftware.com/
Also see
http://www.xbrl.org/eu/CEBS-3/Rivet_Industry Day_Brussels_14 Sept 2005.pdf
Because adding XBRL meta-tags to a given set of financial
statements is time consuming, most large companies are in the process of
adding these tags to their own financial data so that investors will not
have to do their own tagging. The major stock exchanges of the world
are now urging companies to send in their financial reports marked up in
XBRL. Soon they will require all listed companies to submit XBRL-tagged
financial statements.
Bob Jensen's Old XBRL Video Tutorial called XBRLdemos.wmf
About four years ago (I can't remember exactly when) I prepared a XBRL
tutorial on how to use XBRL in financial statement analysis. The
tutorial itself was actually developed by NASDAQ, Microsoft, and PwC in a
NMP partnership. NASDAQ selected 20 companies and marked up their
financial statements in XBRL. Microsoft wrote a fancy Excel program to
analyze those financial statements in Excel. PwC served up the data on
the Web. This NMP tutorial was intended to have a short life since the
plan was eventually to use XBRL directly in Web browsers without having to
use Excel. Indeed, PwC no longer serves up this tutorial. Bob
Jensen probably has the only recorded history of this NMP tutorial on video
in the file XBRLdemos.wfm at
http://www.cs.trinity.edu/~rjensen/video/Tutorials/
Bob Jensen's New 2005 XBRL Video Tutorial called
XBRLdemos2005.wmf
XBRL is now marked up on many financial statements on the Web and can be
used for financial statement analysis in Web browsers. I found a set
of such statements for various (Star) companies on the Korean KOSDAQ stock
exchange homepage.
Before looking at my new video, I want you to first view the
KOSDAQ Camtasia video at
http://www.ubmatrix.com/solutions/WebHelp/KOSDAQDemo.html
After viewing this video, you can then go to my new Camtasia
2005 video XBRLdemos2005.wmv file at
http://www.cs.trinity.edu/~rjensen/video/Tutorials/
My new video is mainly a tutorial about how I learned to use
the XBRL financial statements made available by KOSDAQ for actual use by
investors in companies listed on the KOSDAQ stock exchange.
In particular, my new video shows how to perform the
following steps at the KOSDAQ site.