Neuroaccounting, Part II: Consilience Between Accounting Principles and the Primate Brain

Abstract:     
We develop the hypothesis that culturally evolved accounting principles are ultimately explained by their consilience with how the human brain has biologically evolved to evaluate opportunities for exchange. The primary function of accounting in evaluating exchange is providing information on the net benefits of past exchanges. Accounting's comparative advantage arises because it provides information based on reliable quantified data that is well suited to multi-period settings where reputation and trust are of first-order importance. We review evidence documented by neuroscientists that is consistent with the hypothesis that longstanding accounting principles such as Revenue Realization, Expense Matching, Objectivity, Historical Cost, Going Concern and Conservatism have distinct parallels in brain behaviors. We conclude that NeuroAccounting has important implications for how we think about accounting principles and the ultimate forces behind their emergence and persistence.

Number of Pages in PDF File: 49

Keywords: Accounting principles, economic exchange, neuroeconomics, primate brain

JEL Classification: D80, E11, M40

working papers series