Sunday, June 28, 2009

Accounting error

I'm continually astounded by the general lackadaisical attitude towards accounting error in general society. Some examples:

- governments don't use accrual accounting, yet generate massive future liabilities. Fail!
- historic-cost accounting (the GAAP standard) makes no allowance for appreciation or inflation, a double-fail

There are definitely gray areas in implementing those things, but the benefits should outweigh the costs, and as a manager I definitely want to be aware of accrual effects, appreciation and inflation.

Boring perhaps but it's better than driving businesses (or countries) into the ground...