Formalization of Accounting Standards: A Necessary Technological Evolution
23 Pages Posted: 13 Oct 2011
Date Written: October 13, 2011
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: Suggested Citation