Formalization of Accounting Standards: A Necessary Technological Evolution

23 Pages Posted: 13 Oct 2011

See all articles by John Peter Krahel

John Peter Krahel

affiliation not provided to SSRN

Miklos A. Vasarhelyi

Rutgers Business School

Date Written: October 13, 2011

Abstract

Ambiguities in existing accounting standards yield unintended diversity in practice, diversity that must be corrected through clarifications from the FASB in a time- and effort-consuming feedback loop. Further, a wide gulf exists between the language of standard setters and the structured, purpose-driven framework utilized by standards users. We recommend using formalization, specifically pseudocode, to bridge these gaps between standard setters and practitioners. We present examples of the use of formalization, as well as a road map for future developments, discussing potential roadblocks and alternatives.

Keywords: formalization, accounting standards, pseudocode, ambiguity, standard setting, GAAP

JEL Classification: M41, M49

Suggested Citation

Krahel, John Peter and Vasarhelyi, Miklos A., Formalization of Accounting Standards: A Necessary Technological Evolution (October 13, 2011). Available at SSRN: https://ssrn.com/abstract=1943552 or http://dx.doi.org/10.2139/ssrn.1943552

John Peter Krahel (Contact Author)

affiliation not provided to SSRN ( email )

Miklos A. Vasarhelyi

Rutgers Business School ( email )

180 University Avenue
Ackerson Hall, Room 315
Newark, NJ 07102
United States
973-353-5002 (Phone)
973-353-1283 (Fax)

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