The metaphysics of financial performance in financial accounting

This paper argues that the metaphysics of financial performance in the conceptual framework employed by accounting standard-setters is incoherent: income and expenses cannot, as the framework holds, both be independent elements of financial statements, identified from underlying events, tested for r...

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Bibliographic Details
Published in:Philosophy of management 2023-06, Vol.22 (2), p.205-226
Main Author: Rutherford, Brian A
Format: Article
Language:English
Subjects:
Accounting
Business and Management
Education
Equity
Financial performance
Financial reporting
Financial statements
International Political Economy
Metaphysics
Ontology
Philosophy
Pragmatism
Quality of Life Research
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Summary:This paper argues that the metaphysics of financial performance in the conceptual framework employed by accounting standard-setters is incoherent: income and expenses cannot, as the framework holds, both be independent elements of financial statements, identified from underlying events, tested for recognition and measured by discrete acts, separately from the identification, testing and measurement of other elements and satisfy the analytical relationship between performance and position embraced by the framework. An alternative conceptualisation is proposed, under which income and expenses are part of a wider system of classifying all changes in assets and liabilities, measured indirectly. This approach improves the metaphysical coherence, and thus the intellectual strength, of the framework project; while it leaves the measurement of financial performance unchanged, by emphasising the importance of classification, it invites further attention to the presentation of financial performance, with the potential for improving the usefulness of disclosures.
ISSN:1740-3812
2052-9597
DOI:10.1007/s40926-022-00217-0