Accounting reform

Accounting reform is an expansion of accounting rules that goes beyond the realm of financial measures for both individual economic entities and national economies. It is advocated by those who consider the focus of the present standards and practices wholly inadequate to the task of measuring and reporting the activity, success, and failure of modern enterprise, including government.

Real debate concerns concepts such as whether to report transactions, such as asset acquisitions, at their cost or at their current market values. The former, traditional approach, appeals for its reliability, but can quickly lose its relevance due to inflation and other factors; the latter, increasingly common approach, is appealing for its relevance, but is less reliable due to the need to use subjective measures. Accounting standards setters such as the International Accounting Standards Board attempt to strike a balance between relevance and reliability.

Limited reforms within professional management circles have led in the past to activity-based costing, economic value added, and risk measures. Current accounting practices have also been criticised for being too complex.

Heads of the U.S. Securities and Exchange Commission since the 1980s have consistently complained that this lobbying makes it impossible for them to apply meaningful reform, even in the wake of accounting scandals, e.g. that which felled Arthur Andersen in 2002.

Any comprehensive scheme of accounting reform is a major professional and academic enterprise. Typically it requires examination of the role of each of the fundamental factors of production, an analysis of capital indicating how many types there are and how each supports each factor of a production process.

A comprehensive scheme that would affect, for instance, the United Nations standards for national accounts, the rules of the Bank for International Settlements, or listing requirements on the major , would have to defend any change against critics that advocated lesser reforms.

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