A Sermon to the Accounting Purists

Accounting is a complex, technical, and sometimes arcane discipline. But as hard as the job is, the hallmark of real professionalism is to make a difficult job look easy to others. One main idea to keep in mind is that management reports like the Natural P&L are for managers. As such, they should insulate their audience from the accounting complexities, especially if reducing complexity is necessary to make the information meaningful.

To understand this idea, let's look at one of the more exotic accounting topics (at least to non-accountants): depreciation. When you design a Natural P&L for your organization, I strongly recommend that you avoid presenting depreciation12. as a single, stand-alone line item, and I also suggest avoiding use of the word depreciation in your reports. To some in your audience it is jargon, causing you to run afoul of characteristic #6 (Plain-English terminology). You don't want your audience to do a quick glance down the left side of the page, and start to worry that they won't understand your information.

But a more important problem associated with presenting depreciation expense in a Natural P&L is that it shifts attention away from matters of real importance for the majority of your audience. Including depreciation as a line item sends a loud signal that a Natural P&L has not had appropriate care in its design, and that the audience's needs are not being properly addressed.

Consider the following ...

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