It's hard to believe 10 years and 220 columns (without missing a deadline) have passed since the debut of The Spirit of Accounting, but that is indeed so.Born out of a collaboration between Ed Ketz of Penn State University and Paul Miller of the University of Colorado at Colorado Springs, it has brought issues to the attention of a wide range of accounting professionals, from neophytes still in college up to those in corner suites in corporations, public accounting firms, professional associations and regulatory agencies.

Our objective has never changed, even when Paul Bahnson of Boise State took over for Ed in 2000 after the first 100 columns.

We have approached this pursuit with unflagging enthusiasm and more than a little brashness. That style means we often get right to the point. It helps that we aren't intimidated by the stature of those affected by the issues. With the same dauntless attitude, we have suggested alternatives for producing better outcomes for the profession, the capital markets and the society that we all serve.

We have decided to mark this milestone with a retrospective on some points that we've raised. In most cases, the issues are still controversial and practice has not changed. We're not thwarted by this apparent immutability of the status quo, simply because we know that the future will eventually bring revolution, whether by this generation or the next.

The first shot

Our first column, "Self-regulation: oxymoronic or just plain moronic?" (Jan. 22, 1996), challenged the profession with these words: "Let's quit circling the wagons and stop appointing commissions and panels. ... Let's get up to speed and start delivering what capital markets of the 1990s need and stop putting out financial statements based on concepts from the 1930s and 1940s. ... Let's start working together to solve the measurement problems that the Financial Accounting Standards Board struggles with instead of saying they are insurmountable."

Has anything changed? Of course it has, but the basic problem is still there: indifference to the vast chasm between the services that accountants supply and those demanded by their customers.

Having an impact

Our seventh column gained the attention of Securities and Exchange Commisssion Chairman Arthur Levitt, and was cited in reports from the commission that justified intervening in the process for selecting trustees of the Financial Accounting Foundation. Titled "FEI attack on FASB shows the need for a strong board," it appeared on May 6, 1996, and made these points: "But, time and time again, [preparers] resist every attempt to introduce new information while feverishly grabbing every loophole so they can present pretty pictures to capital markets that simply aren't fooled. Why do we have securities laws? Why do we have the SEC to enforce those laws? Why do we have auditors? Why do we have standards? The answers to all these questions are the same - the preparers need to be controlled, even coerced, into doing what's best for the public."

Within a few months, the foundation board was indeed restructured and no longer dominated by auditors and managers.

No pfooling

Ed and Paul coined the term "pfooling" to describe pooling of interests when FASB was considering doing away with it over the objections of countless opponents. In "Time to stop pfooling around" (Sept. 22, 1997), we said: "To all but a few deluded Americans, pooling is a transparent ploy designed to make capital markets think that the new combination has greater earnings than it does. Despite this obvious failing, many managers and their consultants continue to use it. It's our view that no responsible professional experts should advise clients to spend as much as a dime to accomplish a pooling."

Ray Dever from the auditing profession responded that he had no choice but to go along when a client chose to do a pooling. Our next column reminded him that he was already empowered by Rule 203 to object to the financial statements if he considered them to be misleading. Of course, FASB eventually did away with new pfoolings. Alas, the board is now proposing to do away with Rule 203 ...

EPS and other myths

We have never hesitated to poke fun at sacred cows, as we showed in "Bigfoot, UFOs and EPS - what do they have in common?" (Jan. 3, 2000) by irreverently attacking the credibility of earnings per share under generally accepted accounting principles: "Certainly, a great many people think that Bigfoot and UFOs exist; perhaps they do. After our analysis, though, we've concluded that there is absolutely no basis for believing that any usefulness resides in today's earnings per share. We regret that so many people (even the profession's leaders) act as if EPS actually contains precise and informative content. We're confident that sophisticated financial statement users are not fooled, but perpetuating the myth does nothing but make the markets less efficient and make our profession look foolish. It's time to get real, and accountants and auditors who have any pride should speak up and stop this shill game."

Regrettably, the insane focus on this implausible pseudo-statistic persists, and shame on all who perpetuate the myth.

Aiming at auditors

Paul Bahnson's arrival didn't change our fervor or lack of deference, as shown in "A watchdog or a concierge? The auditors need to decide" (Sept. 25, 2000), when we went after the auditing profession for clinging to its co-dependence on non-audit service fees: "The [auditors argued] there is no 'empirical evidence' that any audit failure has been caused by NAS. Consider these analogies: 'There is no need for a guard rail on this highway because no one has driven over the cliff yet,' and 'We're cutting back on security in the bank because we've never been robbed.' The SEC's obligation is to ensure that no audit failures occur in the future; the auditors' response is, to no one's surprise, to look at the past."

Those defending NAS in 2000 included Joe Berardino, who within a couple years had to explain away Andersen's involvement with Enron. To the profession's embarrassment, it took an act of Congress to wean it of this addiction.


Perhaps some have forgotten the silliness created when the management of the American Institute of CPAs decided that it just wasn't good enough to be a CPA. Instead, the world needed "Cognitors," at least until the membership voted down this goofiness.

In "Cognitancy - may it rest in peace (but no one else should!)" from June 18, 2001, we commented: "We say good riddance to 'Cognitor' - we always thought it combined the word 'cog' (a small piece of a large organization) and 'nit' (a worthless detail) and thus implied that the new accountants would slave away in obscurity on facts of no value to anyone."

What we're still trying to figure out is how the perpetrators of this lame idea have remained in office.


In "The FEI - what a frightfully egotistical and exorbitant institution" (Jan. 7, 2002), we critiqued a September 2001 press release from Financial Executives International that was intended to deter FASB and the International Accounting Standards Board from requiring options to be expensed.

With incredibly poor taste, Pfizer's David Shedlarz connected expensing with the dreadful events of 9/11. We went after FEI, as shown in this example: "[GE's Phil] Ameen also demonstrated how thoroughly he underrates the capital markets' ability to penetrate the fog and fluff that fill his financials by saying: 'Ultimately, companies that may be required to adopt IASB standards will be at a significant disadvantage in the capital markets.' Incredibly, after 30 years of exhaustive research and common-sense reasoning, he still thinks market participants actually believe and act on the untruthful numbers in GAAP financial statements without looking at footnotes or turning to more reliable sources of relevant information. Maybe FEI should stand for 'Flunked Economics Instruction.'"

Even though Ameen's blustering is now passé, we're sure his unenlightened attitude persists among many preparers.

Quality Financial Reporting

One important development over the past decade is our embracing a new paradigm that will revolutionize financial reporting when it takes effect.

We have described it many times, but here is a quote from "The book is out on Quality Financial Reporting" (July 22, 2002): "Virtually all at once, our perspective changed forever. No longer was the issue ethics or political power - instead, it was economics. Those managers who engaged in the most reform with the greatest timeliness would reap the greatest rewards in the capital markets. By engaging in voluntary innovation without waiting for a bureaucratic process, they could enrich themselves and their stockholders more quickly and assuredly than by merely complying with GAAP, regardless of how well they constructed attractive but false images under those rules."

And then we added: "The book's recurring theme is the need for managers and accountants to respond to users' demands for greater quantities of more useful financial information. The incentives for doing so are described through four axioms: (1) more complete information creates more certainty for investors, (2) more certainty causes them to perceive less risk, (3) less risk makes them demand a lower rate of return, and (4) a lower rate of return for them is a lower cost of capital for managers and leads to increased stock prices. Thus, if someone wants lower capital costs and higher security prices, they should start by providing more complete information."

Because of the compelling nature of the paradigm, we're confident that it will eventually be the benchmark by which all financial reports are measured. But that day will remain in the future as long as people entering the profession are trained in school to believe that GAAP is great, and on the job that the status quo is not to be questioned. There is no greater evidence of our perseverance than our pursuit of QFR.

Ten more years?

We could go on and on, but we've said enough to remind us of the awesome responsibility that has fallen on our shoulders to serve as questioners. Some think we're jesters, while others see us as knights. Well, we're neither. We're just a couple of teaching stiffs who are not content to let the accounting world live in denial of its many and varied problems.

To those who appreciate what we do, thank you for your support, and to those who don't, we ask that you at least read our words thoughtfully. Regardless of how distasteful you find them, we think you will benefit from thinking about our message and changing, even if only a little bit.

We can't close without thanking Rick Telberg and Bill Carlino for the free rein they've given us.

Will The Spirit of Accounting last another 10 years? We don't think so, but, then again, we didn't expect the run to be this long in the first place.

Paul B.W. Miller is a professor at the University of Colorado at Colorado Springs, and Paul R. Bahnson is a professor at Boise State University. The authors' views are not necessarily those of their institutions. Reach them at

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