The great German writer Johann Wolfgang von Goethe has one of his characters in Wilhelm Meisters Lehrjahre call double-entry bookkeeping “one of the finest inventions of the human mind". His portrayal may have been ironic, but if you do bookkeeping well, you really do feel the beauty of it.

Tomo Suzuki is a university lecturer of accounting and professor of sustainability science at the Saïd Business School, University of Oxford.

As businesses have grown globally, accounting has had to adapt. International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) have been established. If you believe the brochures, the new “international", “harmonized" accounting standards make for “efficient" financial markets by rendering companies’ performance and stability more “transparent" and “comparable".

The reality is somewhat different. Professor Shyam Sunder of Yale University, who is president of the American Accounting Association, has been openly critical of the current monopoly by accounting rule makers. At Oxford University’s Saïd Business School, we are also sceptical. Why? Because relying on any one set of accounting rules means we are presented with a particular view of corporate reality—one that may not highlight the things that the majority of stakeholders want to see.

The corporate reality that is currently presented by IAS/IFRS reflects the values and needs of investors, in particular international institutional investors. The IAS/IFRS rules are written by the London-based International Accounting Standards Board (IASB), which promotes the idea of “fair value" (that is “market value") accounting focusing on providing information that is useful in making financial investment decisions. That’s fine for global investors, but not so good for other stakeholders.

The average CEO or CFO, for example, is unlikely to feel that market value accounting, which is often at the mercy of volatile financial and real estate markets, reflects their company’s true operational performance.

Contrary to the name, “fair value" accounting allows managers a lot of discretion in how they present their accounts, not least because most balance sheet items do not have clear and objective market values. This is one of the main reasons why Japan still objects to IAS/IFRS rules.

The Japanese business community fears that senior managers may lose their highly disciplined approach to financial management if the level of profit can be so easily and legally manipulated by accounting. They also fear that pressure from foreign investors with short-term goals makes it difficult for managers to focus on the long-term strategies that have historically been a key strength of many Japanese companies.

That is why the accounts of Japanese companies show “normal operational profit", a measure which IAS/IFRS are about to drop from their accounting standards.

The voices of employees and community representatives are rarely heard in arguments about the formulation of accounting standards, despite the fact that community representatives are increasingly seen as significant stakeholdersin business.

Meanwhile, “fair value" accounting means that tax officials and lawyers have lost access to the objective data they need to do their jobs effectively.

Additionally, under the current international system, politicians and other stakeholders who care about their domestic welfare and environmental sustainability have no way to measure companies’ performance in these areas. Accounting used to be a means to control corporate behaviour and national economy, but politicians are now about to lose their control.

At Oxford University’s Saïd Business School, and in academic accounting departments around the world, pluralist and social constructivist researchers argue that there is room for multiple, competing accounting frameworks to operate simultaneously, so that different kinds of accounting can be used to present different pictures of corporate life.

From this perspective, we often advise companies, public organizations, and national accounting standards bodies to come up with their own accounting frameworks, designed to show their various stakeholders what they want to see.

Some companies have developed cutting edge environmental accounting which, it turns out, is attracting investors as well as environmentalists. Some arts organizations, educational institutions and government bodies have come up with their own distinctive ways to represent their accounts to the public.

A few powerful emerging economies are trying to develop accounting standards that focus on sustainability as well as growth—a framework which could well take over the IAS/IFRS framework in the future.

The Chinese govern-ment, for example, is keeping a tight rein on its financial accounting standards, and looking for ways to factor in environmental and sustainability concerns.

What picture of corporate reality will Indian business choose to paint? Oxford welcomes Indian businesspeople, professionals, officials and academics to work with us as they create their own works of art.

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