Some Conceptual Tensions in Financial Reporting
Accounting Horizons, Volume 26, Issue 1 (March 2012)
Posted: 19 Sep 2011 Last revised: 12 Jun 2013
Date Written: September 19, 2011
We examine four key conceptual tensions that are at the heart of many financial reporting dilemmas: stocks vs. flows, ex-ante vs. ex post, conventions vs. economic substance, and top-down design vs. 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
JEL Classification: M40
Suggested Citation: Suggested Citation