The Legitimacy Predicament of Current-Day Accounting Theory

Abstract

The pressure on sustainability and responsible resource utilization while meeting stakeholder requirements often result in accounting information being misaligned with its objective of providing information for decision support. Even though the interpretation of accounting information is vital for all who interact with a company, one wonders whether this has not become muddled more than accounting protocols. Since philosophy is understood as a rational investigation of truths, such an approach to critically reflect on the legitimacy of accounting (as a science) may be overdue. In context, this chapter illustrates a reflective research approach to consider the impact of ethical considerations in accounting, the definition of an accountancy philosophy that embraces accountability, integrity, and reliability, and the concepts of value and decision-usefulness. The reflection concludes that ethical conduct remains a crucial aspect of accounting, founded on competency, integrity, objectivity, and confidentiality. Furthermore, three essential objectives of accounting theory are recording incurred economic events, providing practical and comparable information about such events, and facilitating management decisions. Accounting could thus be seen as a measurement activity to estimate reality and is unlikely to possess any predictive ability due to the various users’ different objectives and backgrounds. The decision-usefulness criteria, however, cannot outrightly be rejected.