Episode 68
The End of Accounting – Financial Reporting in the Dock
Baruch Lev
Baruch Lev is the co-author with Feng Gu of “The End of Accounting and the Path Forward for Investors and Managers.” He is Professor of Accounting and Finance at New York University Stern School of Business. In his current position, Professor Lev teaches courses in accounting, financial analysis and investor relations. He is an outspoken critic on the decreasing relevance of traditional financial reporting and the damage this does to society, investors and the companies themselves. Shownotes:
- Why we should question the usefulness of financial reports
- Why the forceful bodies that set accounting standards are rarely challenged and
- Why stakeholders prefer the status quo over advancement
- How the book ‘The End of Accounting’ got its title
- Why the accounting profession is currently in a terrible shape
- There have been no significant changes in accounting standards in the last 45 years, to the detriment of the profession
- Why there is so little change in the way accountants work, and why this is bad
- Too many large corporations and accounting standards influencers favor the status quo and not transparency, disclosure and change
- Financial reporting has become much more complex in language and readability
- Why financial reports rarely reflect the true value of a company
- The impotence of earnings – why it is not a predictive measure of company health
- As little as 5% of a company’s stock price appears in the financial reports
- Why there will never be a unified set of accounting standards globally
- The UK and US accounting standards boards are converging,though the UK is slightly more progressive
- Investors get hurt by poor financial reporting, and can even be deceived
- In the US, 70% of pharmaceutical and bio-tech companies are reporting losses because of how R&D is represented in the accounts
- Managed money (by hedge funds etc) is doing very poorly which explains the massive migration of investors from managed money to index funds
- Poor financial reports hurts investors and hurts the companies themselves
- There should be two kinds of financial statements issued by companies and corporations
- The unpublished accounting information of subscription based companies like Netflix that truly predicts future performance
- There is a big difference in financial accounting reports between what is voluntary and what should be mandatory to reveal
- Tax lawyers won’t fight against the complexity of tax law as it makes them money – accountants are the same with accounting rules
- It’s embarrassing to teach MBAs in the 21st century an accounting system that existed 100 years ago
- The single biggest reason there is very little appetite to change accounting legislation from policy makers and governments
- Why the broken system of accounting reporting hurts society
- What will happen to financial accounting reporting in the next 10 to 15 years
- Information about intangibles (IT systems, brands, human resources, training, R&D) needs to feature in accounting financial reports
- How can an audit of something that is no longer useful continue to flourish for accounting firms?
'Tax lawyers won't fight against tax law complexity as it makes them money - accountants are the same with accounting rules' says bestselling author of 'The End of Accounting' @lev_baruch on the #Accounting Influencers Podcast…
Professor Lev has been with NYU for more than ten years. He was formerly with the University of Chicago, University of California, Berkeley (jointly at the business and law schools), and Tel Aviv University, where he had been the dean of the business school. Lev has extensive experience in public accounting, finance and consulting and served on various boards. He won many scholarly awards and prizes, including two honorary doctorates, and testified several times before congressional committees. Lev authored five books and more than 100 research papers published in leading academic journals. Contact Baruch directly:
Baruch’s ‘End of Accounting’ Blog
Liked your Accounting Influencers Interview with Rob Brown" target="_blank">Baruch on email
Foa an excellent review of Baruch’s book by the brilliant Ron Baker, who has also been a guest of the show here, check out this great piece on LinkedIn: The End of Accounting: Book Review.
