Some Conceptual Tensions in Financial Reporting American Accounting Association's Financial Accounting Standards Committee (FASC)

ABSTRACT

We examine four key conceptual tensions that are at the heart of many financial reporting dilemmas: stocks versus flows, ex ante versus ex post, conventions versus economic substance, and top-down design versus bottom-up evolution as sources of accounting practice. Associated with each of these conceptual dimensions is an accounting duality; in some cases, one side (e.g., stocks) is easier to measure in a reliable manner, while the other side (e.g., flows) is easier to measure in other instances. We suggest that financial reporting would benefit from a willingness to pay attention to, and find compromise between, both sides of these tensions; forcing a choice of one over the other does not serve to improve financial reporting.

Keywords:  conceptual tensions, stocks-flows, ex ante-ex post, conventions-economic features, design-evolution

Source : Yuri Biondi, Jonathan Glover, Karim Jamal, James A. Ohlson, Stephen H. Penman, Shyam Sunder, and Eiko Tsujiyama (2012) Some Conceptual Tensions in Financial Reporting. Accounting Horizons: March 2012, Vol. 26, No. 1, pp. 125-133.