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Alternative (conventional accounting) rules may, for the individual citizen,
Alternative (conventional accounting) rules may, for the individual citizen, mean the difference betweenmean the difference between employment and unemployment, reliable products and
employment and unemployment, reliable products and dangerous ones, enriching experiences and oppressivedangerous ones, enriching experiences and oppressive ones, stimulating work environments and dehumanising ones,
ones, stimulating work environments and dehumanising ones, care and compassion for the old ancare and compassion for the old and sick versusd sick versus intolerance and resentment. (Tinker, 1985, p xx) intolerance and resentment. (Tinker, 1985, p xx)
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In the previous chapter (chapter 2), the researcher outlined the world view and value systemthe researcher outlined the world view and value system of Islam and compared it with that of the Western worldview; he highlighted the consequent of Islam and compared it with that of the Western worldview; he highlighted the consequent economic implications and the accounting implications of these differences. In this chapter, economic implications and the accounting implications of these differences. In this chapter, the critique of conventional accounting from the social and critical literature and behavioural the critique of conventional accounting from the social and critical literature and behavioural accounting literature will be reviewed. The review is undertaken through five main themes: accounting literature will be reviewed. The review is undertaken through five main themes: objectives, fundamental assumptions, characteristics, macro-conseque
consequences of accounting for Muslim managers and employees, and are these are in line consequences of accounting for Muslim managers and employees, and are these are in line with Islamic values?
with Islamic values?
The researcher argues that
The researcher argues that conventional accountinconventional accounting in terms g in terms of its objectives, characteristicsof its objectives, characteristics and consequences is a negative force from an Islamic perspective and classifies these and consequences is a negative force from an Islamic perspective and classifies these characteristics as the “push factors” necessitating the search for an alternative Islamic characteristics as the “push factors” necessitating the search for an alternative Islamic accounting.
accounting.
In the next section (3.1), an outline of the critique of conventional accounting literature is In the next section (3.1), an outline of the critique of conventional accounting literature is given. Next, an examination of the critique with respect to the objectives, assumptions given. Next, an examination of the critique with respect to the objectives, assumptions (section 3.2), accounting concepts and characteristics (section 3.3) and
(section 3.2), accounting concepts and characteristics (section 3.3) and the economic, socialthe economic, social and environmental consequences of conventional accounting (section 3.4)
and environmental consequences of conventional accounting (section 3.4) is undertaken. Inis undertaken. In section 3.5, the management accounting and the critical accounting literatures relating to section 3.5, the management accounting and the critical accounting literatures relating to budgeting and control systems will be used in considering the behavioural effects of budgeting and control systems will be used in considering the behavioural effects of management acc
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3....1111 AANAANN ON OUOOUUTUTTLTLLILIININENNEE OE OOOFFF VF VVVAARAARRIRIIOIOOUOUUSUS ASSAACACCCCCCOCOOUOUNUUNNTNTTITIININNGNG CGGCCRCRRRIIITITTITIIQIQUQQUUEUEESESSS.... The literature, which
The literature, which criticises conventional accounting, draws on various perspectives:criticises conventional accounting, draws on various perspectives: i)
i) Social anSocial and environmd environmental accoental accounting (Maunting (Maunders & unders & Burrit, 1991Burrit, 1991; Gray e; Gray et al., 199t al., 1996; Gray6; Gray & Bebbington, 1998),
& Bebbington, 1998), ii)
ii) Marxist/ critical Marxist/ critical accounting accounting (Tinker et (Tinker et al., 1982; al., 1982; Tinker, 19Tinker, 1985; Coope85; Cooper & Hor & Hopper, 1990pper, 1990;; Lehman, 1992a; Galhlhofer & Haslam,
Lehman, 1992a; Galhlhofer & Haslam, 1995),1995), iii)
iii) Feminist Feminist critiques critiques (Cooper, (Cooper, 1992; 1992; Reiter, Reiter, 1997) 1997) andand iv)
iv) Public Public interest interest arguments arguments (Arrington, (Arrington, 1990, 1990, Briloff, Briloff, 1990).1990). Although all of the
Although all of the different critique of conventional accounting point out its different critique of conventional accounting point out its deficiencies fromdeficiencies from their own perspectives, many of the issues raised are common to which Islamic academics their own perspectives, many of the issues raised are common to which Islamic academics would have concerns. Some of the concerns about the application of conventional would have concerns. Some of the concerns about the application of conventional accounting to Islam
accounting to Islamic societies are simic societies are similar to that raised bilar to that raised by researchers iy researchers in other areas. n other areas. InIn spite of this, not all the concerns of Islamic societies are addressed by these critiques as spite of this, not all the concerns of Islamic societies are addressed by these critiques as
There is no dearth of criticism of conventional accounting. The criticism began soon after There is no dearth of criticism of conventional accounting. The criticism began soon after accounting started to grow in prominence and stature in the early part of this century: this accounting started to grow in prominence and stature in the early part of this century: this was especially the case in the USA and the UK where modern corporate accounting can be was especially the case in the USA and the UK where modern corporate accounting can be said to originate. Early accounting critiques were based mainly on
said to originate. Early accounting critiques were based mainly on the problem of obtaining athe problem of obtaining a ‘true income’ figure. Very few academics with the exception of writers such as MacNeal ‘true income’ figure. Very few academics with the exception of writers such as MacNeal (1970 [1939]) criticised the accounting principles and valuation methods
(1970 [1939]) criticised the accounting principles and valuation methods and tried to infuse and tried to infuse aa moral conscious
moral consciousness and public sness and public spirit into the professpirit into the profession. Writers such as Sion. Writers such as Sprague prague (1971,(1971, [1922]) and
[1922]) and Scott Scott (1931) focus(1931) focused on ed on the Philosthe Philosophy of ophy of accounts aaccounts and the nd the culturalcultural significance of accounts respectively.
significance of accounts respectively.
Accounting has faced ever-increasing criticism since it
Accounting has faced ever-increasing criticism since it became an important discipline and abecame an important discipline and a profession in the early part of this century. In its attempt to become a respectable discipline profession in the early part of this century. In its attempt to become a respectable discipline akin to that of
akin to that of Law and Medicine, the AICPA (and their academic counterparts- the AmericanLaw and Medicine, the AICPA (and their academic counterparts- the American Accounting Association), attempted to develop a theory of accounting (AAA, 1936;1966; Accounting Association), attempted to develop a theory of accounting (AAA, 1936;1966;
countries. The rise of “Managerial Capitalism” (Chandler, 1977), or “Investor capitalism” countries. The rise of “Managerial Capitalism” (Chandler, 1977), or “Investor capitalism” (Bryer, 1993a) led to the concentration of power and wealth in the hands of a few people. (Bryer, 1993a) led to the concentration of power and wealth in the hands of a few people. This resulted in a greater emphasis on market efficiency and shareholder value in society This resulted in a greater emphasis on market efficiency and shareholder value in society with the associated environmental destruction, nihilistic consumerism, wealth appropriation with the associated environmental destruction, nihilistic consumerism, wealth appropriation and social conflicts. This phenomenon also gave prominence to the
and social conflicts. This phenomenon also gave prominence to the accounting profession inaccounting profession in the guise of multinational audit firms especially the Big Six (now the
the guise of multinational audit firms especially the Big Six (now the Big four). The critique ofBig four). The critique of these excesses of the corporation started in the 1970’s when their social costs became these excesses of the corporation started in the 1970’s when their social costs became staggering and could not be ignored. This led to a debate regarding the moral and social staggering and could not be ignored. This led to a debate regarding the moral and social responsibility of corporations
responsibility of corporations (e.g. Donaldson, 1982; Mintzberg, 1983) and extended to(e.g. Donaldson, 1982; Mintzberg, 1983) and extended to corporate accounting and governance, e.g. Gray et al., (1988,1991) and Benston (1982). corporate accounting and governance, e.g. Gray et al., (1988,1991) and Benston (1982). The Corporate Report (ASSC, 1975) was an attempt to incorporate the social responsibility The Corporate Report (ASSC, 1975) was an attempt to incorporate the social responsibility of corporations in
of corporations in accounting although it adopted a accounting although it adopted a ‘decision-use‘decision-usefulness’ framework.fulness’ framework. The true income school and
positive accounting theorists argued that accounting should study ‘what is’ and try to positive accounting theorists argued that accounting should study ‘what is’ and try to investigate whether financial statements could predict future events (Watts & Zimmerman investigate whether financial statements could predict future events (Watts & Zimmerman ,1979 and 1986). Capital market studies such as Ball & Brown (1968), Beaver (1981) and ,1979 and 1986). Capital market studies such as Ball & Brown (1968), Beaver (1981) and Watts & Zimmerman (1979 and 1986), together with agency theory (Jensen & Meckling, Watts & Zimmerman (1979 and 1986), together with agency theory (Jensen & Meckling, 1976) which assumed that people are self-seeking zealots, led accounting away from moral 1976) which assumed that people are self-seeking zealots, led accounting away from moral and social issues to concentrate on increasing the wealth of finance providers and market and social issues to concentrate on increasing the wealth of finance providers and market players.
players. This became This became the mainstream the mainstream of accounting of accounting research aresearch and the primnd the primary focus ofary focus of practice which saw finance and financial markets develop as important disciplines in their practice which saw finance and financial markets develop as important disciplines in their own right, separate from that of accounting.
own right, separate from that of accounting.
This capitalistic orientation has attracted a great deal of
This capitalistic orientation has attracted a great deal of MarxistMarxist critique of accountingcritique of accounting which argues that accounting is merely a tool which increases the gap between the rich and which argues that accounting is merely a tool which increases the gap between the rich and the poor and
the poor and leads to claleads to class conflicts (Tinkss conflicts (Tinker, 1985; Leher, 1985; Lehman, 1992a man, 1992a ). ). Marxists alsoMarxists also launched their attacks through the medium of critical theory (e.g. Laughlin, 1987; Cooper & launched their attacks through the medium of critical theory (e.g. Laughlin, 1987; Cooper &
view corporations and accounting as agents for the destruction and pollution of the view corporations and accounting as agents for the destruction and pollution of the environment and the biosphere (Maunders & Burritt, 1991).
environment and the biosphere (Maunders & Burritt, 1991). A
A Public-InterestPublic-Interest perspective is taken by writers like Briloff (1990), who argue thatperspective is taken by writers like Briloff (1990), who argue that Accountants have not honoured their duties of public service by shamelessly paying littler Accountants have not honoured their duties of public service by shamelessly paying littler attention to their ethical codes and by being involved in a number of high profile scandals. attention to their ethical codes and by being involved in a number of high profile scandals. The
The Social and Environmental AccountingSocial and Environmental Accounting writers criticise modern accounting fromwriters criticise modern accounting from various perspectives mentioned above. However, its main advocates (e.g. Gray et al., 1996; various perspectives mentioned above. However, its main advocates (e.g. Gray et al., 1996; Matthews, 1994) favour an evolutionary approach of extending conventional accounting to Matthews, 1994) favour an evolutionary approach of extending conventional accounting to recognise, report and disclose social and environmental information leading to their recognise, report and disclose social and environmental information leading to their discharge of accountability to society.
discharge of accountability to society. Finally, a critical
Finally, a critical cultural perspectivecultural perspective has developed which argues that accounting hashas developed which argues that accounting has cultural relevance and should be tuned to the cultural idiosyncrasies of space and time cultural relevance and should be tuned to the cultural idiosyncrasies of space and time especially in the different cultural and economic environments of developing countries especially in the different cultural and economic environments of developing countries
public interest accounting literature being mainly concerned with
public interest accounting literature being mainly concerned with the failure of the failure of the accountingthe accounting profession is not reviewed, as this research does not concern itself with this issue in any profession is not reviewed, as this research does not concern itself with this issue in any detail. The feminist critique is not discussed except to take some lessons for Islamic detail. The feminist critique is not discussed except to take some lessons for Islamic accounting from ‘enabling accounting’ (Reiter, 1997).
accounting from ‘enabling accounting’ (Reiter, 1997).
The discussion starts in the next section with the objectives and assumptions of The discussion starts in the next section with the objectives and assumptions of conventional accounting.
conventional accounting.
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From the period 1977-1985, the Financial Accounting Standards Board of the United States From the period 1977-1985, the Financial Accounting Standards Board of the United States of America spent millions of dollars and thousands of man hours trying to develop some of America spent millions of dollars and thousands of man hours trying to develop some theoretical basis for accounting in the form of a conceptual framework. This was supposed theoretical basis for accounting in the form of a conceptual framework. This was supposed to be a “ coherent system of inter-related objectives and fundamentals ...that prescribes the to be a “ coherent system of inter-related objectives and fundamentals ...that prescribes the nature, functions, and limits
this paradigm i.e. on the aggregate behaviour of decision makers (i.e. Market players) as this paradigm i.e. on the aggregate behaviour of decision makers (i.e. Market players) as depicted by changes in security prices (e.g. Ball & Brown, 1968; Beaver et al.,1968).
depicted by changes in security prices (e.g. Ball & Brown, 1968; Beaver et al.,1968).
Lehman (1992a) notes the change of emphasis from stewardship to decision usefulness or Lehman (1992a) notes the change of emphasis from stewardship to decision usefulness or ‘decision informa
‘decision informativeness’ from the AICPA’s Study Group repotiveness’ from the AICPA’s Study Group report on Objectives. rt on Objectives. He contendsHe contends that the traditional stewardship role always necessitated considering management’s that the traditional stewardship role always necessitated considering management’s effectiveness and efficiency, despite the tendency to justify this slant towards decision effectiveness and efficiency, despite the tendency to justify this slant towards decision usefulness as a “higher form of stewardship” (p20). The difference is not superfluous but usefulness as a “higher form of stewardship” (p20). The difference is not superfluous but calculated to empha
calculated to emphasise sise “the informationa“the informational role of accounting being rel role of accounting being regarded as crucial togarded as crucial to the efficient allocation of society’s resources by individuals, enterprises and government” the efficient allocation of society’s resources by individuals, enterprises and government” (p21). Combined with agency theory and positive accounting theory, this became the (p21). Combined with agency theory and positive accounting theory, this became the dominant paradigm of accounting in the 1990’s; adoption by the FASB’s conceptual dominant paradigm of accounting in the 1990’s; adoption by the FASB’s conceptual framework project probably added to its central role. In fact, decision-usefulness has framework project probably added to its central role. In fact, decision-usefulness has become the dominant paradigm of all subsequent conceptual frameworks since the FASB’s become the dominant paradigm of all subsequent conceptual frameworks since the FASB’s
that the decision-usefulness paradigm was arrived at. In discussing the environmental that the decision-usefulness paradigm was arrived at. In discussing the environmental context of th
context of the objectivee objectives of finans of financial reportincial reporting, g, the Statementhe Statement of Finat of Financial Acconcial Accountingunting Concept 1
Concept 1 (FASB, 1978(FASB, 1978) ) notes that:notes that:
“The US is a highly developed exchange economy where large amounts of capital “The US is a highly developed exchange economy where large amounts of capital is required for maintaining the complex production processes which result in the is required for maintaining the complex production processes which result in the production and exchange of goods and services. These processes require economic production and exchange of goods and services. These processes require economic resources, which is allocated by the market mechanism. The effectiveness of resources, which is allocated by the market mechanism. The effectiveness of individuals
individuals (through buying, sellin(through buying, selling or holding shares & bonds) and g or holding shares & bonds) and enterprises,enterprises, markets and government in allocating scarce resources among competing uses is markets and government in allocating scarce resources among competing uses is enhanced (.i.e. allocated to enterprises that use
enhanced (.i.e. allocated to enterprises that use them efficiently) if those who makethem efficiently) if those who make economic decisions have information regarding the standing and performance of economic decisions have information regarding the standing and performance of business”.
business”. (FASB, (FASB, 1978, 1978, p p 5-8).5-8).
In this context, competitive markets are seen as a significant factor in resource allocation in In this context, competitive markets are seen as a significant factor in resource allocation in the economy (in addition to government whose intervention is frowned upon). Thus, the economy (in addition to government whose intervention is frowned upon). Thus, “decision usefulness relies heavily upon the language of self-seeking rationality, markets “decision usefulness relies heavily upon the language of self-seeking rationality, markets and economic efficiency to describe accounting problems and interpret accounting events” and economic efficiency to describe accounting problems and interpret accounting events” (Williams, 1987).
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The essential message of decision usefulness is that accounting provides information which The essential message of decision usefulness is that accounting provides information which leads to the efficie
leads to the efficient allocation of nt allocation of resources resources (AAA, 1977). Th(AAA, 1977). This is apparenis is apparently through thetly through the process of providing information, which results in information efficiency in the market, which process of providing information, which results in information efficiency in the market, which in turn
in turn leads to allocatioleads to allocation efficiency. Althoun efficiency. Although efficiency (the mgh efficiency (the most output per uniost output per unit of input)t of input) may well be a useful goal to aim for, it cannot be the ultimate aim of human society. It is an may well be a useful goal to aim for, it cannot be the ultimate aim of human society. It is an intervening variable which perhaps leads to a better life or more utility (perhaps at least in intervening variable which perhaps leads to a better life or more utility (perhaps at least in the material se
the material sense). nse). This deficienThis deficiency has led a cy has led a committee of the committee of the American AcAmerican Accountingcounting Association (AAA, 1975) to add “social
Association (AAA, 1975) to add “social welfare” as the ultimate aim welfare” as the ultimate aim of allocation efficiency.of allocation efficiency.
Commenting on the inadequacy of a report by the Study Group on Objectives of Financial Commenting on the inadequacy of a report by the Study Group on Objectives of Financial Statements (AICPA, 1973), this committee (AAA, 1975) observed that the Study Group’s Statements (AICPA, 1973), this committee (AAA, 1975) observed that the Study Group’s assertion that financial statements should provide information useful for making decisions , assertion that financial statements should provide information useful for making decisions , “was not broad enough to lead a complete set of criteria against which accounting “was not broad enough to lead a complete set of criteria against which accounting
Leaving aside the definition of “social welfare” for the moment, (discussed in section 3.2.3.), Leaving aside the definition of “social welfare” for the moment, (discussed in section 3.2.3.), the question arises, does conv
the question arises, does conventional entional accounting reallaccounting really lead to social welfare (evey lead to social welfare (even in then in the material sense) through the chain depicted in figure 3-1 above? In other words, does material sense) through the chain depicted in figure 3-1 above? In other words, does
Better Economic Decisions Better Economic Decisions
Social Welfare Social Welfare
Efficient Allocation of Resources Efficient Allocation of Resources
The question therefore arises as to whether accounting leads to efficient allocation of The question therefore arises as to whether accounting leads to efficient allocation of resources or whether markets are efficient
resources or whether markets are efficient in spite of in spite of accounting regulation.accounting regulation.
(ii)
(ii)
The generalisation of individual preferences to The generalisation of individual preferences to collective preferences by aggregatingcollective preferences by aggregating individual utilities of shareholders who have heterogeneous interests, to obtain individual utilities of shareholders who have heterogeneous interests, to obtain society’s collective preferences is questionable. This has been questioned by Arrow society’s collective preferences is questionable. This has been questioned by Arrow (1971) (as quoted by Lehman, 1992), who concludes that it would take a dictator to (1971) (as quoted by Lehman, 1992), who concludes that it would take a dictator to make social choices affecting more than one individual. This has resulted in the make social choices affecting more than one individual. This has resulted in the recognition by Beaver & Demski (1974) that choice among reporting alternatives has recognition by Beaver & Demski (1974) that choice among reporting alternatives has social consequences that affect non-users and users of accounting information in social consequences that affect non-users and users of accounting information in terms of the distribution of weterms of the distribution of wealth. alth. Hence, ethical jHence, ethical judgements must be mudgements must be made as toade as to whose well being should be enhanced and whose should be diminished.
whose well being should be enhanced and whose should be diminished.
(iii)
(iii)
The separation of social and economic spheres of analysis is another assumption,The separation of social and economic spheres of analysis is another assumption, which has been questioned. For example, Lehman (1992) contends these two which has been questioned. For example, Lehman (1992) contends these twoThe introduction of the term “social welfare” leads to more questions than answers. Social The introduction of the term “social welfare” leads to more questions than answers. Social welfare obviou
welfare obviously means the welfare ansly means the welfare and goodness of the commd goodness of the community. unity. However, “welfarHowever, “welfare”e” and “goodness” again depend on the value system of the community. The differences and “goodness” again depend on the value system of the community. The differences between the values of Western civilization and those of Islam have been discussed in between the values of Western civilization and those of Islam have been discussed in chapter 2. Although there are similarities in moral values (Kant’s – categorical imperatives), chapter 2. Although there are similarities in moral values (Kant’s – categorical imperatives), the modernist and post-modernist trends of Western civilization are not identical with Islam the modernist and post-modernist trends of Western civilization are not identical with Islam and have many differences. Hence, social welfare in
and have many differences. Hence, social welfare in Islam might mean equitable distributionIslam might mean equitable distribution of wealth in an Islamic economy, equal distribution in the communist system, and of wealth in an Islamic economy, equal distribution in the communist system, and concentration of wealth to the ones who make use of opportunity in the capitalist system. concentration of wealth to the ones who make use of opportunity in the capitalist system. Another instance would be perhaps, in the West,
Another instance would be perhaps, in the West, welfare may be measured more in materialwelfare may be measured more in material terms, while the Muslim might trade-off some return in favor of religion (El-Ashker, 1987) or terms, while the Muslim might trade-off some return in favor of religion (El-Ashker, 1987) or other ethical objectives. Even in the West, ethical investors may trade-off some monetary other ethical objectives. Even in the West, ethical investors may trade-off some monetary return in favour of ethical /religious values (EIRIS, 1993). Hence, social welfare may be return in favour of ethical /religious values (EIRIS, 1993). Hence, social welfare may be
Thus increasing decision useful information may lead to an
Thus increasing decision useful information may lead to an increase, decrease or no changeincrease, decrease or no change in social welfa
in social welfare, not necessarire, not necessarily an increase aly an increase all the time. ll the time. A further considA further consideration is thateration is that decision usefulness does not elaborate on what uses the information is put to by users. decision usefulness does not elaborate on what uses the information is put to by users. Such disclosure can actually harm the organisation and society (at least locally). For Such disclosure can actually harm the organisation and society (at least locally). For example, Lau
example, Laughlin & Puxghlin & Puxty (1981) quoty (1981) quote the examplte the example of e of (i) a self-intere(i) a self-interested union sted union thatthat makes use of information to force a firm out of business by insisting on high pay and (ii) the makes use of information to force a firm out of business by insisting on high pay and (ii) the social consequences arising for a particular geographical area which was dependent on the social consequences arising for a particular geographical area which was dependent on the business. In this case,
business. In this case, decision-usedecision-usefulness was not useful fulness was not useful to the local to the local community.community.
In certain cases, firms may wish to restrict information disclosure i.e. in the case where a In certain cases, firms may wish to restrict information disclosure i.e. in the case where a firm exploits a gap in the market and exploits arbitrage opportunities and in the case where firm exploits a gap in the market and exploits arbitrage opportunities and in the case where they have come up with better techniques of production due to their research and they have come up with better techniques of production due to their research and development
development activities. activities. In thiIn this cass case, the e, the disclosure disclosure of seof segmental gmental information information “useful “useful toto users” would
less than 30% of the public are direct investors in the share-market (Mullin, 1998). In less than 30% of the public are direct investors in the share-market (Mullin, 1998). In developing countries, especially Muslim countries, this percentage is even less. Hence this developing countries, especially Muslim countries, this percentage is even less. Hence this point is particularly valid for Muslim countries who do
point is particularly valid for Muslim countries who do not have developed stock markets andnot have developed stock markets and who may not wish
who may not wish to construct “wealth-siphoning” structures in their countries.to construct “wealth-siphoning” structures in their countries.
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Accounting is normally seen as a complex set of socially neutral techniques which are value Accounting is normally seen as a complex set of socially neutral techniques which are value free and objective. However, the reality is that accounting is a social construction (Hines, free and objective. However, the reality is that accounting is a social construction (Hines, 1988). Gray et al. (1996) warns us that reductionism leads to artificial systems boundaries 1988). Gray et al. (1996) warns us that reductionism leads to artificial systems boundaries around those parts we might choose to ignore (e.g. ethics, values, exploitation, and the around those parts we might choose to ignore (e.g. ethics, values, exploitation, and the natural environment). Using the General Systems Theory framework, they assert that natural environment). Using the General Systems Theory framework, they assert that accounting, ec
accounting, ecology, society, ology, society, organisationorganisations etc., are as etc., are all systems, wll systems, which interachich interact. t. TheseThese systems can be conceptualised and their interaction conceived of differently. They assert systems can be conceptualised and their interaction conceived of differently. They assert
Gray et al. (1996) posits that decision usefulness is a normative justification for accountants Gray et al. (1996) posits that decision usefulness is a normative justification for accountants and the accounting profession acting under such a conception of society. Such a society is and the accounting profession acting under such a conception of society. Such a society is beset with contradictions. In real life, people are not equally endowed financially, beset with contradictions. In real life, people are not equally endowed financially, intellectually and socially. It is powerful groups acting in their own interests, which make intellectually and socially. It is powerful groups acting in their own interests, which make decisions. Decision usefulness is viewed by Gray et al. (1996) has having many internal decisions. Decision usefulness is viewed by Gray et al. (1996) has having many internal contradictions
contradictions e.g. the finane.g. the financial measure cial measure of societal of societal wealth anwealth and its distrid its distribution. bution. ThisThis sometimes leads to anomalies where environmental degradation is counted as an increase sometimes leads to anomalies where environmental degradation is counted as an increase in GDP. The increasi
in GDP. The increasing gap between ring gap between rich and poor is not quch and poor is not questioned in such a estioned in such a society. society. ItIt has no room for
has no room for environmenenvironmental or ethical values other tal or ethical values other than self-interested utilitarianisthan self-interested utilitarianism.m. Thus accounting which emphasises the desirability of actions by its financial consequences Thus accounting which emphasises the desirability of actions by its financial consequences (i.e. profits as a ‘good’) supports a certain moral position and encourages a certain (i.e. profits as a ‘good’) supports a certain moral position and encourages a certain behaviour, which is represented as “ moral”
behaviour, which is represented as “ moral” by accounting numbers.by accounting numbers.
In questioning why a talented group such as accountants should exert so much effort to In questioning why a talented group such as accountants should exert so much effort to
The asymmetry of decisio
The asymmetry of decision-usefulness an-usefulness arises from the non-surises from the non-substitutability of bstitutability of the dual rolethe dual role played by it; as a criterion for making judgements about the value of accounting data and as played by it; as a criterion for making judgements about the value of accounting data and as an explanation of the phenomenon the accounting data represent. The consequence of this an explanation of the phenomenon the accounting data represent. The consequence of this asymmetry is that contradictions are created; for example , in the case of the FASB project asymmetry is that contradictions are created; for example , in the case of the FASB project between SFAC 1, objective and the constraints imposed in SFAC2 , Qualitative between SFAC 1, objective and the constraints imposed in SFAC2 , Qualitative characteristics. According to Williams, there is no necessary property to explain these characteristics. According to Williams, there is no necessary property to explain these constraints on the production of accounting data. Accountability on the other hand, is a more constraints on the production of accounting data. Accountability on the other hand, is a more appropriate principle as it implies constraints and possesses fairness as an inherent appropriate principle as it implies constraints and possesses fairness as an inherent property.
property.
The second problem asserted by Williams is that the rationale of decision usefulness in the The second problem asserted by Williams is that the rationale of decision usefulness in the efficient allocation of resources is problematic because it ignores issues about the efficient allocation of resources is problematic because it ignores issues about the distribution of those res
distribution of those resources. He argues thources. He argues that at “Efficiency or allo“Efficiency or allocation is but one aspcation is but one aspect ofect of a two-aspect process” (p176). Although accountants seem to ignore the problem, they a two-aspect process” (p176). Although accountants seem to ignore the problem, they
up their operations into property development and property investing and pay substantially up their operations into property development and property investing and pay substantially more tax, if they had, had to adopt the provisions of SSAP 12. Although these companies more tax, if they had, had to adopt the provisions of SSAP 12. Although these companies were exempted in the UK,
were exempted in the UK, companies in the US were not companies in the US were not spared the negative economic andspared the negative economic and organisational consequences of the introduction of SAS 8 on Foreign exchange organisational consequences of the introduction of SAS 8 on Foreign exchange transactions.
transactions.
Laughlin & Puxty (1981) blame the myopia of “decision usefulness” on the misinformed Laughlin & Puxty (1981) blame the myopia of “decision usefulness” on the misinformed dichotomy between external and internal accounting which ignores “ the control nature of all dichotomy between external and internal accounting which ignores “ the control nature of all accounting information and the need to take account of the reporting entity’s needs in accounting information and the need to take account of the reporting entity’s needs in financial reports” (p74). They suggest an alternative framework of organisational control financial reports” (p74). They suggest an alternative framework of organisational control which they claim can lead
which they claim can lead to social welfare (under specified conditions).to social welfare (under specified conditions). They posit that interna
They posit that internal and external accol and external accounting should be unting should be designed in sucdesigned in such a way so as h a way so as toto meet the needs of the organisation i.e. the content should be such that it increases meet the needs of the organisation i.e. the content should be such that it increases organisationa
3 3 3
3...2.22.2..6.666 CoCCConoonncncclclluluusussisiioioononsnnss osoononn tntththhehee DeDDeDeececciciisissisiioiooonn-nn---UUUsUssseeef ef uf f uulullnlnneneesesssssss OOObObb jb j je jeececctcttitiivivveveesesss ooof of f Cf CCoConoonnvnvveveenentnnttitiiiooononannaalall AlAAcAccccccocoououununntnttitiininngngg.g... We can therefore conclude that the decision usefulness paradigm of conventional We can therefore conclude that the decision usefulness paradigm of conventional accounting is flawed because:
accounting is flawed because: 1.
1. The theory that provision of conventionaThe theory that provision of conventional accounting informatiol accounting information leads to efficientn leads to efficient allocation of resources is tenuous because there are two many ‘ifs’ in the sequence of allocation of resources is tenuous because there are two many ‘ifs’ in the sequence of assumptions.
assumptions. 2.
2. Even if informEven if information results in ation results in shareholdeshareholder and creditor r and creditor wealth maximwealth maximization, this doeization, this does nots not mean better welfare even for themselves, much less for the wider community and society mean better welfare even for themselves, much less for the wider community and society because material wealth may not necessarily mean better quality of
because material wealth may not necessarily mean better quality of life and welfare.life and welfare. 3.
3. Even in economEven in economic terms, decision-uic terms, decision-user based accounser based accounting may be econoting may be economically harmfulmically harmful to the organisation providing the information which may even result
to the organisation providing the information which may even result in social dislocation.in social dislocation. 4.
4. The economic eThe economic environment hypnvironment hypothesised for decisiothesised for decision useful accounon useful accounting is a develoting is a developedped exchange economy with a capital market focus. This implies that conventional exchange economy with a capital market focus. This implies that conventional
accounting techniques. He includes the historical cost, revenue, matching, objectivity and accounting techniques. He includes the historical cost, revenue, matching, objectivity and full-disclosure, conservatism, materiality and the uniformity and comparability concepts as full-disclosure, conservatism, materiality and the uniformity and comparability concepts as principles.
principles. Belkaoui Belkaoui classifies classifies the the monetary monetary measurement measurement and and entity entity concepts concepts asas postulates.
postulates.
Accounting information produced in accordance to these principles is often put forward as Accounting information produced in accordance to these principles is often put forward as objective, neutral, verifiable and reliable. However, even the economic consequences objective, neutral, verifiable and reliable. However, even the economic consequences produced by the accounts prepared under these principles were shown to be wanting as produced by the accounts prepared under these principles were shown to be wanting as early as 1931 by
early as 1931 by MacNeal. These principles and concepts have been criticised both from theMacNeal. These principles and concepts have been criticised both from the capitalist (e.g. Edwards & Bell, 1961; Chambers, 1966; Stirling, 1970) and Islamic points of capitalist (e.g. Edwards & Bell, 1961; Chambers, 1966; Stirling, 1970) and Islamic points of view (Abdelgader, 1994) although the latter was at a superficial level (see Adnan & Gaffikin, view (Abdelgader, 1994) although the latter was at a superficial level (see Adnan & Gaffikin, 1997).
1997).
MacNeal (1970, [1939]), argued that accounting was ‘untruthful’ as it consisted of ‘unsound MacNeal (1970, [1939]), argued that accounting was ‘untruthful’ as it consisted of ‘unsound accounting principles’ which he claimed was based on ‘expediency rather than the truth’ (p accounting principles’ which he claimed was based on ‘expediency rather than the truth’ (p
was higher than the
was higher than the prevailing market price. Thus, the prevailing market price. Thus, the accounting principleaccounting principles were acceptables were acceptable for this period, as the accountant could satisfy both the interest of the banker by being for this period, as the accountant could satisfy both the interest of the banker by being conservative, and the businessman/owner would not be mislead as the latter knew the real conservative, and the businessman/owner would not be mislead as the latter knew the real value of his assets independent of the accountant. The accountant, left with the question of value of his assets independent of the accountant. The accountant, left with the question of valuing non-marketable fixed assets invented his theory of the going concern so that he valuing non-marketable fixed assets invented his theory of the going concern so that he could justify its valuation in terms of its original cost less depreciation for maintenance and could justify its valuation in terms of its original cost less depreciation for maintenance and renewal.
renewal.
Mergers and Acquisitions led to bigger and bigger corporations controlled by non-owner Mergers and Acquisitions led to bigger and bigger corporations controlled by non-owner management. This led to a situation where many small shareholders were entirely management. This led to a situation where many small shareholders were entirely dependent on financial statements for information to make their investment decisions. The dependent on financial statements for information to make their investment decisions. The accounting principles led to the preparation of financial statements which ‘frequently allow accounting principles led to the preparation of financial statements which ‘frequently allow managers and directors of a company to enrich themselves at the expense of the managers and directors of a company to enrich themselves at the expense of the stockholders in a most
by Lowe (1970) for “multiple-column reporting” alternate values and the proposal to report by Lowe (1970) for “multiple-column reporting” alternate values and the proposal to report both realised and realisable profits by Edwards & Bell (1961). The Trueblood Committee both realised and realisable profits by Edwards & Bell (1961). The Trueblood Committee Report was rejected because it was
Report was rejected because it was too revolutionary.too revolutionary.
The monetary measurement concept also produces problems as it implies only activity, The monetary measurement concept also produces problems as it implies only activity, which is measurable in terms of money, are recorded and reported. This may leave out which is measurable in terms of money, are recorded and reported. This may leave out activities, which are termed externalities because they are too difficult to measure but which activities, which are termed externalities because they are too difficult to measure but which have grave consequences to society. Further, the most important asset, the human asset is have grave consequences to society. Further, the most important asset, the human asset is not recorded on a
not recorded on a balance sheet.balance sheet.
Besides the economic consequences on investors noted above, Accounting rules have also Besides the economic consequences on investors noted above, Accounting rules have also social consequences, Tinker (1985) observers that:
social consequences, Tinker (1985) observers that:
“Accounting rules though galvanizing and adjudicating social relationships are “Accounting rules though galvanizing and adjudicating social relationships are not support
not supported by ‘coned by ‘contemplation, reftemplation, reflection, criticism lection, criticism and debatand debate about e about thethe nature of society and its potentialities ‘ but by ‘ expedient reasoning, ad-hoc nature of society and its potentialities ‘ but by ‘ expedient reasoning, ad-hoc explanations
“About half of this difference was attributable to the method of valuing stocks of “About half of this difference was attributable to the method of valuing stocks of books and back issues whilst the remainder of profits on transfers between books and back issues whilst the remainder of profits on transfers between affiliated
affiliated companies”. companies”. (Lowe (Lowe & & Tinker, Tinker, 1977, 1977, p271)p271)
These income determination problems become more acute in an Islamic environment These income determination problems become more acute in an Islamic environment because, Islam does not allow pre-arranged fixed return investments and therefore the because, Islam does not allow pre-arranged fixed return investments and therefore the income calculation is the only way to ascertain returns on an Islamic investment. Hence, its income calculation is the only way to ascertain returns on an Islamic investment. Hence, its importance. importance. 3 3 3 3....4444 TTHTTHHEHEE MEMAMMAACACCRCRORROO COCCOCONOONNSNSSESEQEEQQUQUUEUENEENNCNCCECEESESS OSOFOOFF CFCCOCONOONNVNVVVEENEENNTNTTITIIOIOONONNANALAAL ALLAACACCCCCCOCOOUOUNUUNNTNTTITIININNGNGGG
Professional accountants argue that the political and social consequences of accounting Professional accountants argue that the political and social consequences of accounting practice
practice should not bshould not be e considered bconsidered because accouecause accounting strives to be nting strives to be objective anobjective and neutral ind neutral in social conflict. Accounting records, measures and reports the results of ‘economic activities’ social conflict. Accounting records, measures and reports the results of ‘economic activities’ of enterprises which are delineated from social activities (AAA, 1966). This separation of of enterprises which are delineated from social activities (AAA, 1966). This separation of social and economic spheres of activity has already been criticised from an economic social and economic spheres of activity has already been criticised from an economic viewpoint, in section 3.2.2 above.
expropriation of the life experience of others “through the partisan set of accounting rules expropriation of the life experience of others “through the partisan set of accounting rules that governs the reporting and disclosure of
that governs the reporting and disclosure of information about corporationsinformation about corporations” (p ” (p xix) ,xix) ,
In this context, accounting has been accused of playing changing roles in social conflicts In this context, accounting has been accused of playing changing roles in social conflicts (Lehman, 1992a) and creating social and environmental disasters (Tinker, 1985), its (Lehman, 1992a) and creating social and environmental disasters (Tinker, 1985), its principles unsuitable in the context of providing information on ecological issues (Maunders principles unsuitable in the context of providing information on ecological issues (Maunders & Burrit ,1991).
& Burrit ,1991). It has been accused It has been accused of creating empof creating employment problloyment problems especiallems especially throughy through promoting privatization by demonstrating the efficiency of downsized companies using promoting privatization by demonstrating the efficiency of downsized companies using accounting numbers (Cooper & Hopper, 1988; Arnold & Cooper, 1999). Accounting has also accounting numbers (Cooper & Hopper, 1988; Arnold & Cooper, 1999). Accounting has also been accused of directly causing social conflict by
been accused of directly causing social conflict by increasing the gap between rich and poorincreasing the gap between rich and poor through the wealth distribution effects inherent in the provision of conventional accounting through the wealth distribution effects inherent in the provision of conventional accounting numbers (Tinker, 1985
numbers (Tinker, 1985). ). Further accounting hFurther accounting has also been accuseas also been accused of dehumanizind of dehumanizing effectsg effects arising from the construction of the “governable person” who is a more manageable and arising from the construction of the “governable person” who is a more manageable and efficient entity (Miller & O’Leary, 1987). It has also been accused of promoting gender efficient entity (Miller & O’Leary, 1987). It has also been accused of promoting gender
The negative social consequences of accounting are emphasised by Marxist writers who The negative social consequences of accounting are emphasised by Marxist writers who criticise accounting in the historical materialist framework of Marx. They emphasise criticise accounting in the historical materialist framework of Marx. They emphasise class-conflicts. Even within the limited insight of Marxism, the social, environmental and economic conflicts. Even within the limited insight of Marxism, the social, environmental and economic problems caused by conventional accounting which they highlight is of concern to
problems caused by conventional accounting which they highlight is of concern to Muslims.Muslims. Some of these problems will be examined under the following headings; Multinational Some of these problems will be examined under the following headings; Multinational exploitation, privatisation and loss of work and environmental problems. The dehumanising exploitation, privatisation and loss of work and environmental problems. The dehumanising effects of internal accounting systems are considered under the behavioural effects of effects of internal accounting systems are considered under the behavioural effects of accounting in section 3.5.
accounting in section 3.5.
3 3 3
3...4.44.4..1.111 MMuMMuululltlttitiininnanataattitiioioononannaalall ElEEExxpxxpplplloloiooiitittataatattitiioioononnn Tinker
Tinker (1985) examined the accou(1985) examined the accounts of the Sierra Leone Developmennts of the Sierra Leone Development Corporation from itst Corporation from its inception until its dissolution over a pre and post independence period. Although the inception until its dissolution over a pre and post independence period. Although the traditional profit and loss accounts shows a
traditional profit and loss accounts shows a profitable operation, behind these numbers lay aprofitable operation, behind these numbers lay a very different social and economic story. He concluded that investment by Multinationals in very different social and economic story. He concluded that investment by Multinationals in
results of
results of the indithe individual vidual subsidiary subsidiary (Mouritsen, (Mouritsen, 1995). 1995). For examFor example, foreiple, foreign lumgn lumberber companies operating in Papua New Guinea, sell their lumber to associated companies in companies operating in Papua New Guinea, sell their lumber to associated companies in Hong Kong at a lower than world market prices in order to reduce payment of local taxes. As Hong Kong at a lower than world market prices in order to reduce payment of local taxes. As in the Sierra Leone Corporation’s case, local people are paid miserably lower wages than in the Sierra Leone Corporation’s case, local people are paid miserably lower wages than the expatriates who occupy the management and technical positions.
the expatriates who occupy the management and technical positions.
The use of franchises allows a company to milk its overseas associates through charging The use of franchises allows a company to milk its overseas associates through charging advisory or franchise fee
advisory or franchise fees, which are based on the rs, which are based on the revenue receiveevenue received, and not profits. d, and not profits. TheseThese fees are reported as expenses and sometimes manipulated to avoid local tax. According to fees are reported as expenses and sometimes manipulated to avoid local tax. According to Mouritsen (1995), local governments have to implement benign procedures to control Mouritsen (1995), local governments have to implement benign procedures to control transfer pricing as they are under the constant threat of withdrawal of the foreign investment transfer pricing as they are under the constant threat of withdrawal of the foreign investment and the ensuing loss of jobs. The establishment and adoption of International Accounting and the ensuing loss of jobs. The establishment and adoption of International Accounting Standards perpetuate this problem of transfer pricing by
Standards perpetuate this problem of transfer pricing by multinationalmultinationals (see Hove, s (see Hove, 1989).1989).
3 3 3
No mention is ma
No mention is made of the protection de of the protection of of workers. The sociworkers. The social importance oal importance of the water, railf the water, rail and even health sectors (henceforth to
and even health sectors (henceforth to be called industries) were to be be called industries) were to be de-emphaside-emphasised. Newsed. New accounting based performance indicators were to be used to gauge their viability. accounting based performance indicators were to be used to gauge their viability. Accounting was used to prove them inefficient and non-viable, although this was contested Accounting was used to prove them inefficient and non-viable, although this was contested by the academic accountants (Hopper & Cooper, 1988).
by the academic accountants (Hopper & Cooper, 1988).
Recent studies (e.g. Shaoul, 1997a) have shown that even the economic objectives of Recent studies (e.g. Shaoul, 1997a) have shown that even the economic objectives of efficiency and
efficiency and the anticipatethe anticipated ‘benefit for d ‘benefit for all’ have noall’ have not been reat been realised. lised. Shaoul (19Shaoul (1997a)97a) critically studied the financial performance of ten water and sewerage companies, which critically studied the financial performance of ten water and sewerage companies, which were privatised in 1989. He concluded that private ownership did not increase the efficiency were privatised in 1989. He concluded that private ownership did not increase the efficiency of the industry and that ownership was not the most important factor in determining of the industry and that ownership was not the most important factor in determining performance. Further, the privatisation transferred wealth from the public at large to a performance. Further, the privatisation transferred wealth from the public at large to a relatively few individuals and corporate entities. “Consumer found that prices rose by more relatively few individuals and corporate entities. “Consumer found that prices rose by more than 50%, workers lost their jobs and the nation... made a huge loss on the sale” (p 500). A than 50%, workers lost their jobs and the nation... made a huge loss on the sale” (p 500). A
the company by millions of pounds. The value of the share had increased from £1 (at which the company by millions of pounds. The value of the share had increased from £1 (at which the Treasury had sold it) to £37 in 18 months. Some employees later sued KPMG Peat the Treasury had sold it) to £37 in 18 months. Some employees later sued KPMG Peat Marwick for undervaluing the shares. The case was settled out of court. The industrial Marwick for undervaluing the shares. The case was settled out of court. The industrial tribunal found that the company has constructively dismissed the workers but also awarded tribunal found that the company has constructively dismissed the workers but also awarded them a paltry sum of £10,000 for the loss of security and work conditions and benefits. The them a paltry sum of £10,000 for the loss of security and work conditions and benefits. The same story is repeated in other cases of privatisations e.g. British Gas, British Telecom and same story is repeated in other cases of privatisations e.g. British Gas, British Telecom and Water Authorities where Directors are awarded huge executive salaries and perks when the Water Authorities where Directors are awarded huge executive salaries and perks when the companies were down sized to affect
companies were down sized to affect the “efficiency” indicators of accounting numbers.the “efficiency” indicators of accounting numbers.
The above cases show the role of accounting in the redistribution of wealth resulting from The above cases show the role of accounting in the redistribution of wealth resulting from privatisation, especially the social implications of accounting and accountants’ involvement privatisation, especially the social implications of accounting and accountants’ involvement in privatisation consulting. It shows the role of major accounting firms in the neo-liberal in privatisation consulting. It shows the role of major accounting firms in the neo-liberal privatisation pr
privatisation program. ogram. An Ernst & WhinnAn Ernst & Whinney report claimey report claimed that the Big ed that the Big Six firms were thSix firms were thee dominant providers of privatisation advisory services (EW, 1994 as quoted by Arnold & dominant providers of privatisation advisory services (EW, 1994 as quoted by Arnold &
off and drains non-sustainable resources (e.g. oil and other minerals). Hence business has off and drains non-sustainable resources (e.g. oil and other minerals). Hence business has to play an effective part in controlling, reducing and perhaps reversing the damage to the to play an effective part in controlling, reducing and perhaps reversing the damage to the environment by using different energy sources, using recyclable raw and packaging environment by using different energy sources, using recyclable raw and packaging materials, using pollution control equipment, promoting a greener employment and materials, using pollution control equipment, promoting a greener employment and consumer practices.
consumer practices.
Accounting plays an important part in disguising the environmental impact of economic Accounting plays an important part in disguising the environmental impact of economic activities because it only considers financially measurable economic events. Even for these activities because it only considers financially measurable economic events. Even for these events, it fails to take into account disposal and winding down and contingent cleaning up events, it fails to take into account disposal and winding down and contingent cleaning up costs. For example, in the case of nuclear plants, substantial expenses are incurred in costs. For example, in the case of nuclear plants, substantial expenses are incurred in shutting down old plants because of the cost of
shutting down old plants because of the cost of disposing radioadisposing radioactive materials safely. Thesective materials safely. These deferred costs are not accrued and hence earnings are higher than they should be. Further deferred costs are not accrued and hence earnings are higher than they should be. Further social and health costs are passed on to the community and government because they are social and health costs are passed on to the community and government because they are termed externalities and are not costed by the conventional accounting system unless there termed externalities and are not costed by the conventional accounting system unless there
discernible until many accounting periods in the future. In these circumstances, contingent discernible until many accounting periods in the future. In these circumstances, contingent liabilities need to be disclosed in the notes to the accounts.
liabilities need to be disclosed in the notes to the accounts. An instance in point is
An instance in point is the case of the the case of the Love Canal (Tinker, 1985). Here, the company causedLove Canal (Tinker, 1985). Here, the company caused pollution by dumping toxic wastes into the Love Canal, which were covered up with earth. pollution by dumping toxic wastes into the Love Canal, which were covered up with earth. Later a housing development was undertaken on the same land. The residents later noted Later a housing development was undertaken on the same land. The residents later noted serious health problems including miscarriages and premature deaths. The whole area serious health problems including miscarriages and premature deaths. The whole area became uninhabitable, and the residents had to move to another area losing money on their became uninhabitable, and the residents had to move to another area losing money on their mortgages as well as suffering health problems.
mortgages as well as suffering health problems.
The company polluting love canal did not disclose, even as contingent liabilities, the cost The company polluting love canal did not disclose, even as contingent liabilities, the cost incurred in the clean up and upheaval later. Tinker rightly asserts that there are broad incurred in the clean up and upheaval later. Tinker rightly asserts that there are broad implications of the
implications of these costs se costs for calculating afor calculating and reporting pnd reporting period profits. The meriod profits. The matter of whatatter of what additional costs and when these costs should be reported are not clear. According to Tinker additional costs and when these costs should be reported are not clear. According to Tinker (1985), the Generally Accepted Accounting Principles under-rate long-term costs and (1985), the Generally Accepted Accounting Principles under-rate long-term costs and
regulation until 196
regulation until 1969, for almost 70 years. Initially, 9, for almost 70 years. Initially, the economic rationathe economic rationality of reducing costslity of reducing costs was used to rationalise the measures to
was used to rationalise the measures to reduce sulphur emissionsreduce sulphur emissions. Only after . Only after legislation waslegislation was imposed, did the company set up an Environmental Improvement Project which resulted in imposed, did the company set up an Environmental Improvement Project which resulted in an improvement to its bottom line as a result of technological development. There was an improvement to its bottom line as a result of technological development. There was tension between profits on the one hand and pollution prevention on the other, during the tension between profits on the one hand and pollution prevention on the other, during the 1970’s, when technology did not keep pace with regulation. The environmental disclosures 1970’s, when technology did not keep pace with regulation. The environmental disclosures in the corporate reports were scarce in the early years, as there was nothing positive to in the corporate reports were scarce in the early years, as there was nothing positive to report.
report. Buhr (1998) posits that, by focusing on ecoBuhr (1998) posits that, by focusing on economic concerns annomic concerns and not on the pollutiond not on the pollution prevention efforts, the accounting reports were used to stave off further legislation by prevention efforts, the accounting reports were used to stave off further legislation by showing how costly it was for the company to adhere to the anti-pollution legislation. showing how costly it was for the company to adhere to the anti-pollution legislation. However, from 1980 to 1984, the disclosure of improvement in pollution prevention However, from 1980 to 1984, the disclosure of improvement in pollution prevention technology (which had a positive impact on the bottom line) offered an image of an technology (which had a positive impact on the bottom line) offered an image of an environmentally friendly company. Later, public opinion had swung so far over to pollution environmentally friendly company. Later, public opinion had swung so far over to pollution
