Ending quarterly reports won’t fix companies’ accounting issues. What would.

Advocates for ending quarterly reporting argue it imposes heavy compliance costs and encourages managers to focus unduly on short-term earnings targets. Opponents contend that less frequent reporting would deprive investors of timely information and weaken transparency.

Both sides have reasonable objections. But their emphasis on reporting frequency obscures a more fundamental concern: whether existing regulatory arrangements can actually produce financial statements that are consistent, comparable, and genuinely informative to the public.

Private industry and the government have repeatedly tried and failed to make that possible. In the postwar years of the 1950s, the accounting profession itself sought to manage the task through the Accounting Principles Board. That initiative collapsed in 1973—critics said it lacked independence and coherence.

In the 1970s, a new nonprofit, the Financial Accounting Standards Board, was established with government endorsement to replace the discredited Accounting Principles Board. It was meant to be more independent and conceptually grounded in its rule-making, but persistent lobbying pressures prevented that.

Despite decades of technical pronouncements, major scandals of recent memory—from Enron and WorldCom to the 2023 collapse of several regional banks—illustrate that the current framework continues to fall short. Neither self-regulation by the profession nor government-sponsored boards have ensured the clarity and reliability of financial reporting.

It was precisely this impasse that Leonard Spacek, a former partner of the accounting firm Arthur Andersen, anticipated in the 1950s when he proposed the creation of an Accounting Court. Addressing the American Accounting Association in 1957, Spacek outlined a judicial-style tribunal that would adjudicate contested principles of accounting.

His proposal wasn’t to create another committee issuing compromise rules, but for a forum that would hear arguments, evaluate competing positions, and render reasoned decisions. Written briefs, oral presentations, and published opinions would provide the accounting equivalent of case law, producing a body of precedent to guide auditors, preparers, and users of financial statements.

Such a court would also alter the incentives that shape accounting practice today. Today, companies often select from among generally accepted alternatives, usually opting for the method that presents the most favorable picture of performance. Auditors, in turn, can certify the results so long as they fall within the wide ambit of accepted practice. Investors are left to reconcile incomparable figures.

Spacek’s vision was that an Accounting Court would compel justification of accounting choices with reference to their fairness and utility to all stakeholders: shareholders, employees, consumers, and the wider public.

This approach may feel radical, yet comparable models are already embedded in other areas of commercial life. Contract law, for example, has evolved over centuries through judicial decisions, creating a body of precedent that provides businesses with predictability while accommodating change.

Bankruptcy courts manage disputes among multiple stakeholders under conditions of financial distress, producing orderly outcomes where otherwise there might be chaos. The U.S. Tax Court routinely adjudicates highly technical disputes between taxpayers and the Internal Revenue Service, clarifying ambiguities in law and practice through published opinions. Even in international commerce, arbitration tribunals are relied upon to resolve complex disputes, their authority grounded in transparent proceedings and reasoned judgments.

Accounting, by contrast, has lacked such jurisprudence.

Critics of quarterly reporting are correct that compliance costs are significant. Each cycle of filings requires extensive reconciliations and disclosures that absorb resources better devoted to productive investment. Surveys suggest that firms spend on average between 1.34% and 3.33% of their labor costs on regulatory compliance.

Yet reducing the frequency of reporting risks from four to two times annually reduces transparency at precisely the moment when market confidence remains fragile. The more promising path is to reconsider not how often companies report but how the principles underlying those reports are determined.

An Accounting Court wouldn’t eliminate compliance costs, but it would redirect them to a process that yields stability, consistency, and transparency. Over time, the removal of alternative treatments and the establishment of well-reasoned precedent could even reduce the overall burden on preparers and auditors.

Implementing such a system would, of course, require careful design. Spacek envisioned a tribunal of life-tenured judges, funded by professional assessments, open to arguments from auditors, corporations, regulators, labor unions, and consumer groups. The details might differ today, but the principle remains compelling.

The SEC’s current deliberations about quarterly reporting provide an opportunity to broaden the discussion. The central question isn’t how often companies should file reports, but whether the regulatory structures that underpin those reports are capable of ensuring their integrity.

About the author: Martin E. Persson is an assistant professor of accountancy at the University of Illinois at Urbana-Champaign and a public voices fellow through The OpEd Project.