The Modern Corporation Statement on Accounting
3 Pages Posted: 4 Nov 2016 Last revised: 14 Dec 2016
Date Written: November 3, 2016
The way corporations are accounted for is tremendously important for shaping the way investors and other stakeholders see and assess them. A new understanding of the purpose of financial accounting with adjoining accounting methods thus creates powerful incentives for corporate managers to adjust their actions accordingly, to perform well according to those dimensions that are accounted for and therefore observed.
A number of regulatory initiatives on the national, international and EU levels both foster and fortify the principle of Maximizing Shareholder Value (MSV) in corporate governance. This tendency can be clearly seen in such areas as financial accounting standards and various soft and hard law initiatives pertaining to corporate governance that have flourished in recent decades. Such developments over recent decades can result in insidious changes whereby a highly contestable, accounting-based measure of business success can become an end in itself at the expense of more pluralist and socially accountable stewardship of companies.
A number of characteristics of these developments can be explicitly linked to the ascendance of MSV in corporate governance. We provide this Summary of certain fundamentals of accounting in an effort to help prevent analytical errors which can have severe and damaging effects on corporations.
JEL Classification: M00, M1, M10, M14, M4, M40, M41, O16, G3
Suggested Citation: Suggested Citation