Concepts, like Plato’s “forms”, exist in the world of ideas. Compared with their myriad manifestations, the concepts of, say, “window”, “chair” or “coin” exist in the mind, immutable and unchanging.
Similarly, our structured accounting lexicon began with broad acceptance of its underlying concepts. These criteria were treated as assumptions, laying the groundwork for that other abiding yet indefinable concept, true and fair.
Speaking of which, I once addressed a gathering of the Anglo-French Accountants’ Society (in English, mercifully) at a sumptuous venue near Versailles on the subject of harmonising UK and European company law. The French members, wearing headphones, listened dutifully to the efforts of a struggling translation team.
The problem is not just technical. The drive to forge uniformity out of diversity will always be frustrated by unique cultural and linguistic structures implicit in national identity.
Undefined perceptions give meaning
While in France I was further struck by the example of the audit report. In the UK a qualified audit report usually expresses a difference of opinion between auditors and directors on accounting treatments or disclosures. In France, by contrast, the importance of audit “attestation” extended beyond the accounts. Since a qualified opinion would reflect badly on the conduct and integrity of the directors personally and as a board, an unqualified audit opinion was de rigueur, serving implicitly as exoneration from liability. Meanings may therefore stem from traditional usage, even nuance, and undefined perceptions can be more influential than mere words on the page.
It is questionable whether the exponential expansion in content of company reports has added commensurately to issues that users have always considered paramount, such as comparative-period trends; capital cost and return; resource utilization and whether reported profits are reflected in cash flow.
words, misused, can be inherently disruptive of meaning
When the accounting framework rested on the concepts of prudence, consistency, accruals and going concern as a priori criteria for true and fair accounts we all knew what they meant without having to subject them to the straightjacket of verbal definition. It sufficed that their alternatives (“optimism”, “inconsistency”, “cash accounting” and “gone concern”) were patently untenable.
Humpty Dumpty meanings
Yet words, misused, can be inherently disruptive of meaning – as Humpty Dumpty puts it to Alice: “When I use a word it means just what I choose it to mean – neither more nor less”.
Opposition parties everywhere deride policies to balance national budgets as “austerity”
Members of the travelling public have become “customers” rather than passengers, and a bank’s customers have become “clients”. Yet the service on both fronts remains lousy. Opposition parties everywhere deride policies to balance national budgets as “austerity”. They never mention its alternative: it’s called poverty.
Take “inflation”, a word often used to connote a rise in prices, however caused. More strictly, it is shorthand for “inflation of the money supply” – which may in turn cause prices to rise to the extent that the new money does not form part of savings – a rare phenomenon, granted, when the Treasury’s own interest rate policy is so destructive of any incentive to save.
If a central banker wishes you “good morning”, I suggest you look at your watch. If he says that, despite massive doses of quantitative easing, inflation is so close to zero that the ghoulish spectre of deflation looms, apply your own reality check: since the start of the financial crisis, according to the Office of National Statistics, food and beverage prices have increased by 35%, household utility bills by 30%, transport by 24% and, overall, sterling has lost almost 20% of its purchasing power.
New candidate to replace “your cheque is in the mail” as the world’s biggest lie: “I’m from the government, and I’m here to help.”