As someone who’s never taken an accounting course in my life, I have often thought about doing so. But I’ve always managed to find a way to put it off. There are probably a lot of people out there like me — people who never had a burning desire to learn accounting but who, given the increasing complexity of personal finances, taxes, investing, etc., feel like they could use some guidance.
Well, it looks as if I should probably procrastinate a bit longer. According to this Wall Street Journal article by David Reilly, a lot of the rules of accounting are about to change. This would obviously affect corporate accountants much more than average Steves, but I think I’ll let the dust settle anyway.
I have to admit that, as an author, my first reaction to seeing this article was a primal one: a new set of rules will be great news for the people hired to write the new accountings texts, and sad news for the authors of the outgoing texts.
Here, from Reilly’s article, is the gist:
In coming months, accounting-rule makers are planning to unveil a draft plan to rework financial statements, the bedrock data that millions of investors use every day when deciding whether to buy or sell stocks, bonds and other financial instruments. One possible result: the elimination of what today is known as net income or net profit, the bottom-line figure showing what is left after expenses have been met and taxes paid. …
The project is aimed at providing investors with more telling information and has come about as rule makers work to one day come up with a common, global set of accounting standards. If adopted, the changes will likely force every accounting textbook to be rewritten and anyone who uses accounting — from clerks to chief executives — to relearn how to compile and analyze information that shows what is happening in a business.
, which downplays the America-is-in-decline meme; meanwhile, Latin America 
(Good WSJ review 
and 
. You can also watch it on 
Forget about text books. Think of all the software systems that would need to be updated or rewritten. The kinds of radical changes that Reilly writes about are likely to be very expensive to implement. I’d be surprised if they went through without some serious opposition from the companies who would have to pay the bill.
Forget about text books. Think of all the software systems that would need to be updated or rewritten. The kinds of radical changes that Reilly writes about are likely to be very expensive to implement. I’d be surprised if they went through without some serious opposition from the companies who would have to pay the bill.
The betting should start on how quickly unscrupulous companies learn how to game this new system of rules to mislead in their filings. I say one quarter is all it will take. Since they will be putting top notch accountants on it, the analysts and us normal investors will be even worse off.
The betting should start on how quickly unscrupulous companies learn how to game this new system of rules to mislead in their filings. I say one quarter is all it will take. Since they will be putting top notch accountants on it, the analysts and us normal investors will be even worse off.
No need to procrastinate on your accounting education. The proposed changes to financial statements appear to be largely confined to their presentation and not to the conceptual framework (FASB Concept Statements)on which they are based. Seperating the income statement into the same categories as a statement of cash flows (i.e. operating, financing & investing) brings the sources of revenue/gains & expenses/losses into sharper relief for banks, investors, etc. To group assets & liabilities in a similar manner should give us a clearer picture of how companies raise & utilize their capital. All of the standard balance sheet accounts appear to be intact so ratio & trend analysis will likely remain unchanged. Financial reporting knowledge gained today which is appropriately rooted in the Concept Statements will properly prepare the user/preparer/analyst of financial statements for any changes to come. It has been said that accounting is the language of business. You wouldn’t have your child put off learning english because you heard a new edition of the MLA handbook was on its way, would you?
No need to procrastinate on your accounting education. The proposed changes to financial statements appear to be largely confined to their presentation and not to the conceptual framework (FASB Concept Statements)on which they are based. Seperating the income statement into the same categories as a statement of cash flows (i.e. operating, financing & investing) brings the sources of revenue/gains & expenses/losses into sharper relief for banks, investors, etc. To group assets & liabilities in a similar manner should give us a clearer picture of how companies raise & utilize their capital. All of the standard balance sheet accounts appear to be intact so ratio & trend analysis will likely remain unchanged. Financial reporting knowledge gained today which is appropriately rooted in the Concept Statements will properly prepare the user/preparer/analyst of financial statements for any changes to come. It has been said that accounting is the language of business. You wouldn’t have your child put off learning english because you heard a new edition of the MLA handbook was on its way, would you?
One possible result: the elimination of what today is known as net income or net profit
Yes, I always thought that knowing how much a company actually makes is probably the most useless thing in life. I tried to tell that to my wife and I never understand why my banker wants to know if my company is making money.
Such petty concerns really.
….sniff……
One possible result: the elimination of what today is known as net income or net profit
Yes, I always thought that knowing how much a company actually makes is probably the most useless thing in life. I tried to tell that to my wife and I never understand why my banker wants to know if my company is making money.
Such petty concerns really.
….sniff……