143

OntheNatureofContemporaryAccounting
andItsResearchMethodology
fromPictureTheorytoSymbolFunctioningTheory

YoshioSuzuki

1Introduction
AccountinghasbeencalledthelanguageofbusinesslButitisnotsosimpletodefine

accountingasthelanguageofbusinessbecausemanydifferentwordsortechnicalterms
usedinaccountingareutilizedwithspecialmeaningswhicharedifferentfrommeanings
inthecommonusageofwordsineverydaylifeThespecialandprofessionalmeaningsof
wordsareattachedtotheaccountingtermsandthisseemstomakeaccountinglessunder

standabletothegeneralpublicInadditionitmustbeborneinmindthatthemechanism

ofaccountingincludingthemeasurementsystemofdoubleentrybookkeepinghastwo
functionsTheoneistoidentifyanddifferentiatethetransactionsandoreventsofenter

prisebyusingwordssuchasassetsliabilitiesequityexpensesandrevenuesTheother

oneistohomogenizethembyattachingnumbersamountsandabstractingthematerial
ityofdifferentiatedtransactionsandoreventsofenterprisefromthemThereforeitis

notsufficienttodefineaccountingsimplyasthelanguageofbusiness

Asmentionedabovewecandefineaccountingasaformalsystemtoexpressthe

businesstransactionsandoreventsbymeansofwordsandnumbersButthisunder
standingisyetinsufficientbecausetheaccountingphenomenaemergeinthesocialcon
textsanditisimportanttoconsiderthenatureofaccountingfromsuchperspectiveThis
meansthatitisnecessarytorecognizeaccountingasasocialandinstitutionalpractice2
Atthesametimeitisalsonecessarytounderstandtheaccountingphenomenaasawrit

tenanddocumentedphenomenatransactionsandeventsbeingwrittenontheaccount
ingbooksorfinancialstatementsphenomenaonthesepapers

llAnalyticalpointofviewtotheaccountingsystem

Whenwetrytostudytheaccountingsystemweshouldfirstofallconsidertherela

tionofeconomicrealitytothewordsandnumbersintheaccountingdocumentsThemost
widelyacceptedideainthisrespectisthataccountingshouldrepresentfaithfullyaneconomic

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reality3LetscallthisideahereaspicturetheoryThecharacteristicofthistheorycanbe

foundinsupposingtheexistenceofonetoonecorrespondencebetweentheeconomicreality

anditspicturewhichisexpressedontheaccountingdocumentsbywordsandnumbers

Thereasonwhythiscorrespondencesupposedinaccountingisregardedaswidely
acceptedisthatitplaysanimportantroleinmeasuringtheamountsofincomeonwhich
dividendsandtaxesaredeterminedandthesocialconsensustothemshouldbeformedIn

ordertomaketheamountsofincomedividendsandtaxesfairlydeterminedandsocially
acceptedtheappliedtechniquesofmeasurementmustbefairandrationalandtheresult

ofmeasurementshouldrepresentaccuratelyaneconomicrealityofbusinessenterprise
Needlesstosaytoconstitutesuchsocialacceptanceorconsensusthismeasurementpro

cessmustbeperformedincompliancewiththesocialnormsforexampleCommercial
LawTaxLawsandAccountingStandardsandsoonWhenwetrytoStudyaccounting
wemustthereforestudynotonlythenatureofmeasurementmechanismbutalsothe
socialandinstitutionalaspectsofaccounting

Eachofsuchsocialnormswhichregulatetheaccountingprocessestakesadifferent
appearancedependingupontheinfluencesofthehistoricaleconomicandculturalenvi

ronmentsofthecountryWhenwetrytostudytheaccountingsystemofeachcountry
internationallyandcomparablyitwillbeanindispensabletasktoclarifythecharacteris

ticsofaccountingsystemundersuchinfluences

CharacteristicsofcontemporaryaccountingPractices
Tomakeclearthecharacteristicsofcontemporaryaccountingpracticesthe
PensionsgeschaftePensionTransactionsinGermanBankAccountingareselectedhere
asanexamplePursuanttoSection340boftheGermanCommercialCodethePension
Transactionsaredefinedasfollows

PensionTransactionsarecontractsbymeansofwhichafinancialinstitution
pledgortransfersinexchangeforpaymentofanamountcertainassetsbelongingto

ittoanotherfinancialinstitutionoroneofitscustomerscreditorandinwhich

contractsitissimultaneouslyagreedthatsuchassetsshallormaybelater
retransferredtothepledgoruponpaymentoftheamountreceivedoranotheramount
agreedtoinadvance

Andinthecaseofagenuinecashsalecoupledwithacontractforsubsequentrepur

chaseGenuinePensionTransactionSection340b2oftheGermanCommercialCode
thetransferredassetsaretobecarriedonthebalancesheetofthepledgorThepledgor
shallshowinitsbalancesheetinfavorofthecreditoranobligatiohintheamountofthe
sumreceivedpursuanttothetransferIfahigherorloweramountisagreeduponforthe

301OntheNatureofContemporaryAccountingandItsResearchMethodology145
retransferthedifferenceistobeapportionedoverthetermofthetransactionThepledgor

shalladditionallystateinthenotesthebookvalueoftheassetsinvolvedThecreditor
maynotstateinitsbalancesheettheassetstransferredtoitforpurposesofthetransac
tionitmustshowinitsbalancesheetaclaimagainstthepledgorintheamountofthesum

transferredIntheeventthatahigherorloweramountisagreeduponforretransferthe
differenceshallbeapportionedoverthetermofthetransaction5

PursuanttoSection340b4oftheGermanCommercialCodethebalancesheetsare
preparedintheformasfollows

PledgorsBalanceSheet

AssetsSide

Assetstransferred

Differenceofamount
LiabilitiesSide

Obligationsintheamountsofthesumreceivedpursuanttothetransfer

Differenceofamount

CreditorsBalanceSheet
AssetsSide

Claimagainstthepledgor

Differenceofamount
LiabilitiesSide

Differenceofamount

Notes
Bookvalueoftheassetsinvolved

FromthisaccountingtreatmentsitwillbeclearthatthewordsAssetstransferred
areanexuviaeonlyaformwithoutsubstanceNeverthelesstheassetsaredescribedon
thebalancesheetasiftheassetsinvolvedwerereallyinexistenceItcouldbesaidthata

virtualimageoraphantomisrepresentedonthebalancesheetbysuchaccountingtreat

ments6WecannotexplainsuchanewsituationinaccountingPracticebyapPlying
picturetheoryThisseemstobetypicalcharacteristicsofcontemporaryaccountingprac
ticesinwhichtheaccountingproblemsonderivativesandintangibleassetsareincluded

IVThemeaningofthevaluationbasedonfairvallle
AccountingprocessescouldbeconstitutedbywordsandnumbersamountsBy

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wordsareheremeanttheaccountingtermsforexampleassetsliabilitiesequityreve

nuesandexpensesetcandbynumbersaremeanttheamountsontheaccountingbooks
andthefinancialstatementsAnditissaidthattherecentaccountingreportingpractices
aresteadilymovingawayfromthetraditionalhistoricalcostbasistothefairvaluebasis
Wecanseehereatrendtowardsvaluationbasedonfairvalueparticularlyforthefinan
cialinstruments7
Toanalyzeandmakeclearthenatureofthistrendinaccountingvaluationtheprob

lemswhichwillstemfromthevaluationbasedonfairvaluemustbeconsideredItseems
tomethattheseproblemsareoccurringaroundthevaluationbyfairvalueItcouldbe

saidthattheaccountantsworldisnowevolvingtowardsfairvalueaccounting8Itis
thereforeimportanttograsptheaccountingmeaningofthevaluationbyfairvaluein
ordertoinquireintothenatureofcontemporaryaccounting

VFairvalueaccountinganditsresearchmethodology
Thevaluationbasedonfairvaluewillbeinternationallyadominantstandardfor
financialreportingin21stcentury9Especiallyforthevaluationoffinancialinstruments
andintangibleassetsfairvaluewillbewidelyacceptedasvaluationbasisAccordingto
thedefinitioninIASIFRSfairvalueisdefinedasfollowse

Fairvalueistheamountforwhichanassetcouldbeexchangedoraliabilitysettled

betweenknowledgeablewillingpartiesinanarmslengthtransaction

Whensuchamountisavailableinthemarketthemarketpriceisregardedasfair
valueandisusedasavaluationbasismarktomarketWhenthereisnoobservablefair

valueontheactivemarketacomparablevalueoramodelbasedvaluemustbeapplied
marktomodeln

Accordingtothisdefinitionfairvalueisdeterminedonthebasisofexpectationas

sumptionandestimationofthemarket2Fromconsideringthecontentofthisdefinition
itseemstobeclearthatfairvalueisdefinedasahypotheticalmarketpriceunderunreal
isticconditions13

Becausetheseexpectationscouldnotberealizableintheworldofheterogeneousex
pectationsitwillbealmostimpossibletoestimateaccuratelysuchfairvalueAccounting
mechanismplaysheretheroleofgivingaspecialformtononexistenteventsbymeansof

symbolswordsandnumbersasiftheywerereallyinexistenceWecanonlyseean
illusionoffairvalueButwecannotrecognizesuchfictiveeventsasfinancialinstruments

andintangibleswithoutsuchaccountingmechanismWithoutaccountingmechanismwe
cannotrecognizeandmeasurefinancialinstrumentsandintangiblesastheobjectofbusi
nessItcouldsafelybesaidthataccountingisamechanismbywhichfictiveeventsare

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OntheNatureofContemporaryAccountingandItsResearchMethodology

147

documentedorrepresentedwithsymbolswordsandnumbersasiftheseeventswere
reallyinexistenceWecanseehereonlyanillusionoravirtualreality

Toexplaintheseaccountingphenomenaitisnecessarytounderstandthenatureof
accountingnotbymeansofpicturetheoryunderwhichaccountingissupposedasrepre
sentingcorrectlytheeconorpicrealityl4butthroughtheanalysisofsocialfunctionof

accountingterminologyandvaluationmechanismwhichcouldbecalledassymbolfunc
tioningtheory15

AsnotedaboveFairValuecouldbesaidoneofthemostimportantconceptswith

whichweaccountantsbusinesspersonsandstudentsofbusinessadministrationshould
befamiliar16Herewillbediscussedbrieflytheresearchmethodologyoncontemporary
accountinghavingfocusedonfairvalue

Theprocessofrecognitionandmeasurementinaccountingcouldbesaidtobethe
processofdifferentiatingunderacertainnameaneventthatisaproductofhistorical

economicandsocialrelationsdifferenciationandatthesametimeofhomogenizingthe
differentiatedeventbyattachingitanumberamounthomog6n6isationOnthisocca
sionweshouldpayattentiontothefactthatthesizeofthisnumberamountdoesnot
representthesizeofanobjectitselfwhichismadeinexistencebybeingattachedacertain

wordbutreverselythesizeofnumberamountisdeterminedonlybybeingattacheda
certainsizeofnumbertoitTheacttoattachanumberamountisgenerallycalledthe

valuatiOninaCCOunting
Ifwecoulddefinetheprocessofrecognitionandmeasurementinaccountinglikethis

itcouldbesaidthattheaccountingprocesshastwoaspectsnamelythebookkeeping
mechanisminthisprocessabstractsabstrairethematerialnatureofobjectsofdifference
anddiversityobjetstr6sdifferentsetdiversandontheotherhandhomogenizethemby

quantifyingwithmoneyamountsmontarisation
NowaftertheWorldWarLthegoldstandardsystemwasabolishedintheEuropean
CountriesandthesystemwascomeoffalsointheUSonAugustl51971Theeraofpaper

moneyhascomeUnderthissituationwheremoneyhaslostitssubstantialendorsement

weshouldrecognizethatthemeaningofaccountingvaluationhasalsochangednamely
thevaluationamountsinaccountingdonotrepresenttherealvalueoftheobjectscon

cernedandhavebecomeasuperficialsignifiantsymbolicexpressionwithout
r6frent7Thereferenttowhichthesymbolswordsandamountsinaccountingreferis
onlyavirtualrealityconstructedbythesymbolsinwidesenseThisisaworldofaccount
ing

TodaythenatureofthisaccountingworldisgettingmorefictiveWeshouldgive

attentiontothefactthatanexistenceconstructedbysymbolswordsandamountsinthe
accountingworldlookslikeanexistenceofrealworldbutinfactitisonlyaFant6meof

nonexistencewhichisexpressedandvisualizedbysymbolsThereforethesameword
andorconceptinaccountingcanbeusedwithdifferentmeaningsAndthewaytoattach

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numberstothiswordandorconceptnarhelythevaluationprocessisdeterminedbythe

accountinginstitutionincludinglawsandconventionsThedifferencesinthemeaningof
wordandvaluationcouldbereducedtothedifferencesofaccountinginstitutioninits
SOCialCOnteXtS
Theacceptanceoffairvalueinaccountinginstitutionmightleadstothereconsidera
tionofthenatureofaccountingfromvariousperspectives18

VIThenatureofcontemporaryaccountingandthereformof
auditingsystem
AsrepresentedforexamplebytheenactmentofSarbanesOxleyActintheUSA19
wearesituatednowintheeraofrapidchangeinthesocialinstitutiontorestorethereli
abilityofaccountinginformationToattainthisendthereformofauditingsysteminclud

inginternalcontrolsystemhasbeennecessaryHoweveronthereasonoffictivenature
ofcontemporaryaccountingofwhichIhavementionedaboveitseemstoberatherdiffi
cultforaccountantstoaccomplishthistaskbytheirownprofessionalabilitiesandethical

responsibilitiesHereisthereasonwhytheauditingsystemmustbereformedmainly
underthepowerofgovernmentAnditisimportanttorecognizethattheselfregulation

ofaccountingprofessionwasdeniedandtheenforcementsystembythegovernmentfor
examplePCAOBintheUSAwasintroducedintheauditingprocess2
Torestoreandsecurethereliabilityofaccountinginformationitseemstobeinevita

blyrequiredtoreformtheauditingsystemWithoutsuchreformaccountinginformation
couldnotbegenerallyacceptedasrelevantandreliableWeshoulddeliberateonthe
problemswhichcouldbecausedbytheintroductionofIASIFRSAtthesametimewe

shouldreconsiderourresearchmethodologyandstrivetoanalyzetherelationbetween

thenatureofcontemporaryaccountingincludingtheapplicationofIASIFRSandthe
reasonsofreformofaccountinginstitution
Accountingcouldbedefinedasamechanismofgivingthespegialformtononexistent

eventsbymeansofsymbolswordsandnumbersasifsucheventswerereallyinexis
tenceTheamountsattachedtofairvaluewhicharedisclosedonthefinancialstatements

aredeterminedbyusingsuchmechanismWithoutthismechanismwecouldnotrecog
nizeandmeasuresuchfictiveeventsasfinancialinstrumentsandintangibleassetsNow
itisagoodchanceforustoinquireintothenatureofcontemporaryaccountingandits

researchmethodology

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OntheNatureofContemporaryAccountingandItsResearchMethodology

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London1995PP223270

IFRSUSGAAPComparisonEdbyPrincipalAuthorsandEditorsfromErnstYoungsFinan
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DevittMichaelSterelyKimLnguageandRelityOxford1999pp25927LGouxJeanJoseph
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ColasseBernardComptabilit6Gn6ralePCGIASIFRSEtEnron9e6ditionEconomica2005
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SaussureFerdinanddeCsdelinguistiqueg6n6rale1916translatedintoJapanesel9281939

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RichardJacqueColletteChristineSystmecomltablefranaisetnormsIFRS7e6ditionDunod
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Thispaperistherevisedoneofmypaperswhichwerereportedattheresearchconferenceatthe

UniversityofParis1Panth60nSorbonneheldonthe2ndMarch2006