Misunderstandings and Confusion in Modern Accounting

This paper attempts to expose the misunderstandings that lurk in the theory and practice of modern accounting and the resulting confusion. The following four points are discussed. (1) There is no end to the number of illusions and misunderstandings about “academic freedom” and “scientists” that are widespread in the world. There are many examples of what we thought were“ science” as money-laden techniques, people who are said to be“ (scientific) scholars” are habitual plagiarists , and weapons development that use peaceful use as a cover are examples of runaway science and scholarship. Now, does the Science Council of Japan have the power to stop such runaway science and scholarship? (2) Traditionally, the establishment of accounting rules has taken an inductive approach by summarizing what is generally accepted as fair and reasonable from the practice of corporate accounting. However, it has been pointed out that the inductive approach is difficult to respond to new types of transactions and events, and that accounting rules are not coherent and consistent with each other. In order to solve these problems, it became necessary to develop accounting rules in a deductive manner so that they became a theoretical system, and conceptual frameworks emerged as a means of doing so. Does the conceptual framework help to solve the problem as intended? (3) The law often makes provisions that place more emphasis on external form than on the substance of transactions and facts, in order to value formality. It is sometimes said that accounting and reporting should focus on the economic substance of transactions and facts rather than on the form of law. This is called the “substance over forms.” But, is it permissible to break the law on the grounds of disclosing economic substance? (4) The current accounting does not recognize the costs incurred in the prevention and recovery of environmental destruction, air pollution, health hazards, etc. that occur in the production and sales activities of companies. They have been borne not by the companies that manufacture and sell them but someone else has borne or suffered damage. Companies that make and sell things have increased their profits because they do not bear these costs.“ Profits are privatized, and costs and losses are socialized (i.e., socially burdened).” Even if a company continues to do things that are contrary to social justice, it is not a good idea for accounting to foolishly calculate and report it as the result of business activities.