by Paul B.W. Miller and Paul R. Bahnson

A  recent issue of Accounting Today published letters from two obviously stressed readers. Although the letters’ topics are different, they both shout to the world: “Stop telling me what to do!”

According to our Web searches, both writers are accounting professionals with years of experience, a fact that makes their whining more regrettable. Perhaps we’re idealists, but we hope that the wisdom of age and the battle scars of a public service career will actually prompt older professionals to lead in calling for progressive change to salvage what little integrity and usefulness remains in financial reporting. Alas, our hopes are misplaced, at least in these two, because they cling desperately to the status quo.

This column is addressed to those two individuals and others who might be following unwittingly in their footsteps. Our advice is: “Let it go. The old, wrong ways need to be replaced.”

The letters struck a grating chord with us because they display an attitude that we have condemned for more than a half dozen years. Specifically, the writers approach financial reporting issues from the perspective of those who supply information instead of those who demand it.

Simply put, our profession’s profitable financial reporting monopoly is over. Detroit learned that lesson the hard way in the 1980s, when they found they couldn’t just bend metal, slap it together, put tires on it, and sell it to customers. The industry had to reinvent itself to stand up to the challenge as offshore car makers outdid and outbid them with higher quality, better features and lower prices.

In the same way, those who provide generally accepted accounting principles financial statements are stuck in a self-absorbed blind alley. They keep thinking that the only thing that matters is getting the job done quickly without regard to the information’s quality or usefulness.

The first letter is tinged with irony, as the writer praises Congress (especially Rep. Richard Baker, R-La.) for passing a bill out of committee that would override the Financial Accounting Standards Board’s proposed stock options standard. It is remarkable, if only because it is the first we’ve seen from a CPA who favors legislative meddling in reporting standards.

It is also notable for the writer’s release of pent-up resentment toward the American Institute of CPAs and FASB because of their past performances. In fact, he goes so far as to plea for Congress to take full control over GAAP and asks Baker to “continue doing the good work — but should you fail, then we accountants will have to deal with one more ‘damn’ estimate.”

Here’s our point — notice that the burr under his saddle was not that financial statements might be useless, and that he was not upset that the capital markets will receive incomplete and useless information. He was not even anxious that the most fickle political process of them all would be showering its uninformed and unwelcome attention on standard-setting. Rather, he was worried that he will have to estimate a number that he can’t find on a canceled check. He just can’t be bothered to report facts that help users know what management has done. His complaint was all about him, not about those who rely on him to provide useful information.

The second letter was also authored by a CPA, and it, too, came from the obsolete perspective that doesn’t even nod to those who need useful information to reasonably estimate a stock’s intrinsic value. Ironically, he actually makes his living by providing valuation services. (Isn’t that like a mechanic complaining that too many cars are breaking down?) Despite a major opportunity to earn fees by providing crucial services that users need, the writer complained that our column audaciously proposed change.

A self-serving, “It’s-all-about-me” attitude was obvious in the second sentence: “But I wonder why the authors did not expressly address the problem of how to establish market values for the difficult assets on the balance sheet.” We think our point was clearly stated, but we’ll make it again: It will be useful to report value-based information. His selfish complaint was that we didn’t provide detailed instructions. This challenge is as unreasonable as it would have been to insist that the inventors of transistors in the 1950s specify how to build a 3-Mhz microcomputer.

As we see it, our task was (and still is) to proclaim that users’ needs are better served, and more profitably served, when financial reports are actually useful instead of convenient for those who prepare them. We are content with our role, which may very well be the most we can do. When, for goodness sake, will valuation experts grasp that they can make a fortune by serving users?

The letter then quoted us in what, to him, must seem clinching evidence of the worthlessness of our ideas. In our defense, the quote is taken completely out of context. Furthermore, the writer must not have read our columns from February, March and April, which built the case for serving users by reporting more market values. He seemed worried only that he might have to change and does not refute our message that the surest path to progress is voluntary experimentation, not coercion.

He also claimed: “It is estimated today that intangibles make up to 70 percent of the value of some companies. How are we to arrive at their market values, if there are no recorded market transactions?” Two thoughts come to mind. First, if no one can estimate their value, how can anyone believe his assertion that intangibles constitute 70 percent of anything? Second, if intangibles are that significant, isn’t it true that statement users have a pent-up, unsatisfied demand for useful information and that they would be willing to pay for it? He couldn’t have done a better job of making our point for us.

Furthermore, if he were to read our Feb. 23, 2004, column, he would learn that we agree that intangibles are troublesome because their values are elusive. Where we differ is that we don’t despair and retreat to useless cost data but point to the usefulness that can be added to financial statements by those who are bold enough to figure out new answers. In turn, that usefulness means more income for accountants.

He then admonished us: “Abstract accounting theory must be backed up by realistic methodologies before they can be implemented within our accounting systems.” First of all, we and a great many others have had more than enough of “our accounting systems.” It’s time to toss them out and start over again.

Second, it is not incumbent on theoreticians to provide detailed solutions to all practical problems, just as it is not incumbent on practitioners to develop detailed and conceptually sound theories. We merely point the way for progress; those who hear it can choose either to stay where they are or commit to trying something new that might be better.

We’re sure that both writers felt relieved once they completed their cathartic release of frustration. We don’t begrudge that benefit. What we don’t want is for others to confuse their laments with legitimate proclamations of what ought to be. Our profession has gone in those wrong directions far too long with disastrous results.

So, don’t listen to them. Two wrong letters don’t add up to a right.

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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