The End of Accounting and the Path Forward for Investors and Managers

Chapter 17So, What to Do with Accounting? A Reform Agenda

In which we propose far-reaching changes to the current accounting and financial reporting system (GAAP) to arrest the fast-diminishing usefulness of financial information, which we have documented in Part I of the book. We propose a three-pronged substantive overhaul of the system, which is a far cry from the common “fine-tuning” of accounting regulators. Nothing short of this, we believe, will reverse the declining usefulness trend of financial information.

Revitalizing Accounting

Having established earlier in the book that, in recent decades, accounting-based financial reports lost most of their relevance to investors, followed by the identification of the major reasons for the relevance lost, and outlining our proposed strategic corporate report to respond to current investors' needs, the remaining question is: How can historical-based accounting and financial reporting be restructured and rejuvenated to provide investors' needs and complement our proposed forward-looking disclosure on company strategy and execution?

The gradual, fine-tuning approach of accounting regulators to enhance information effectiveness failed, as we have shown in Part I of the book. But don't just take our word for it. A recent exhaustive examination of the Financial Accounting Standards Board's (FASB) 40-year regulatory record corroborates our verdict.¹ Four accounting researchers examined the impact on investors of 147 accounting ...