Bright Line Impossibilities

Academics, regulators and accounting professionals argue as to the relative importance of “bright lines” in accounting standards. Similar to driving on a highway and knowing that the white lines demarcating the road also advise the driver as to when one is heading for the ditch.

People like to have a clear idea as to when they are onside or offside.

Yet accounting also prides itself in the role played by professional judgement. How the bright lines can’t tell you about the sharpness in a particular curve in the road, or how best to travel if the road is wet or show-covered.

Then one finds accounting researchers associated with this supposed “eureka moment“, when appreciating that no set of accounting principles can address all circumstances. Professional judgement is necessary throughout, with bright lines being a necessary component in certain circumstances. Assumption that one has a road to demarcate, as opposed to a forest to navigate through, path or no path. Sometimes the reality is more forest than road.

Uncertainty, ambiguity and the necessity to exercise judgement are taken as givens in most areas of law. The application of accounting standards and the development by analogy of other defensible accounting practices are no less complicated than comparable legal reasoning processes. Yet too many placing too much comfort in the bright lines, before maybe missing the cliff over the ridge.

Drove away and couldn’t find my way back:


About brucelarochelle
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