Accounting,

Orgunizution.sand

Society, Vol. 16, NO. 3, pp. 287-295,

1991.

Printed in Great Britain

0361-3682/91 S3.00+.00 Pergamon Press plc

ACCOUNTING AND SOCIAL CHANGE: A NEUTRALIST VIEW*

DAVID SOLOMONS WhartonSchool, University of Pennsylvaniq Philadelphia

Abstract This paper takes the position that the task of accountants is to provide information as free from bias as possible that will be useful to decision makers (possibly including accountants themselves) who may be concerned with social and economic issues. Though accountants may sometimes fail to achieve the faithful representation of economic phenomena, that should be their goat. In developing this argument, the paper criticizes Badical Accounting, as represented by Tony Tinkers Paper f%@&.r, and others who assert that accounting policies should be chosen for their supposedly desirable economic consequences rather than for their capacity to depict relevant phenomena faithfully. Like journalists, accountants should report the news, not make it. Neutrality in accounting may not always be easy to secure, but without it the credibility of accounting is endangered.

With social change in the broadest sense accounting has little to do. One of the most significant social changes that has occurred in this century is the dramatic improvement in the position of women. Like most social changes, this one has been accompanied by economic changes, such as changes in the pattern of consumption and the distribution of income. Another great social change during the last fifty years is the disappearance of colonialism. That too has brought economic changes in its wake. To suggest any direct connection between those broad developments and accounting would be farfetched indeed. But on a smaller stage, accounting does have a part to play. It has been asserted, for example, that an accounting standard that requires research and development expenditure to be written off as incurred, in spite of the probable future benefits that are expected to flow from it, depresses the earnings of small immature hightechnology companies and thereby discourages technological innovation. Without regard, for

the moment, to the truth or falsity of that assertion, it well exemplifies the part that accounting may play in encouraging or inhibiting social and economic change. The question to be addressed here is this. Should accountants see themselves and their discipline as agents to promote (or sometimes to retard) social and economic change? Or should they see themselves as providers of unbiased information, to facilitate social and economic activity by others? By others I mean, of course, to include accountants themselves in their capacity as citizens, not as accountants.

A RADICAL VIEW OF ACCOUNTING I want to leave no doubt as to where I stand on this issue. I believe that accountants are like journalists. They should report the news, not make it. This is the view that I shall explore more fully in what follows. But in case it is thought that

Earlier versions of my paper were presented as a Lee Kuan Yew Lecture in the National University of Singapore in December 1986 and to the European Accounting Association at the annual meeting in Stuttgart in April 1989. My thanks are due to the fate Steven B. Johnson, formerly of Columbia University, for his help in formulating my ideas on the subject of this paper. 287

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DAVID SOLOMON Accounting theory, like any social belief, is not merely a passive representation of reality, it is an agent in changing (or perpetuating) a reality. Marginahsm provides accounting with a slanted picture of reality that affects both how the latter misperceives, and how it acts on, reality. This slant is ideological insofar as it misconstrues circumstances and events in order to promote certain partisan interests (Tinker, 1985, p. 28).

the opposite view is merely a straw man, I propose to bring into court an outspoken proponent of that other view, and, so far as possible, I shall allow him to speak for himself. I am referring to Dr Tony Tinker, of Baruch College, CUNY. His views are set out at length in a book, published in 1985, entitled Paper Propbets: A Social Critique of Accounting. Tinker and others who think like him use the term radical accounting as a label for their views, and it will be convenient if I follow their example. Let me warn you, before I set out on this examination of radical accounting, that it is not easy to come to grips with it. It is fairly easy to see what radical accountants find to criticize in traditional accounting; and it would not be difficult to suggest modifications of traditional accounting that would go some way to meet those criticisms. But modifications are not what this argument is about. The argument, in fact, is more about the nature of capitalist society and the marginalist theory of value that economists use to explain the working of capitalist economies. This is what Tinker has to say about the dependence of accounting on the marginal theory of value.
Most accounting practice has achieved a harmony with marghtahst value theory without much conscious deliberation. This is mainly because marghrahsm is the only value theory with which most accountants are familiar; thus they reduce all economics to marginahsm . . Marginalism has virtually monopolized ah accounting retlection about value theory, notwithstanding the fact that in order to resolve technicll problems of concept operationahaation and measurement, accountants have deviated from the marginahst model. These deviations and compromises have alI been in terms of the fine print, however; even the much vaunted area of social accounting is nothing more than marginahsm with externalities. The obliviousness of accounting to ah other theories of value is sufficient reason for concluding that accounting is unabashedly marginaIist in its intellectual aiEIiation.s (Tinker, 1985, p. 111).

In a related passage, Tinker has this to say about the social role of accounting.
In addition to reflecting economic exchanges - albeit partially - accounting practice also helps effect economic exchanges. Accounting statements are used in making decisions about the purchase of a companys securities, in assessing a &ms tax liability, in determining the rates a public utility can charge its customers, in deciding whether an employer can afford to pay a wage increase, and so forth. This is not a passive and representational role for accounting; ultimately accounting is part of that exchange process itself - as an informational commodity that promotes exchange. If accounting practice did not participate in exchange in this way, then presumably, competitive pressures would eradicate it as an unnecessary cost of production (Tinker, 1985, pp. 8384).

Tinker then goes on to attribute what he regards as accountings antisocial bias to this intellectual affiliation with marginalism. For him, theories are weapons of social conflict, and accounting theory is no exception. Here is what he has to say on that subject.

I do not understand the distinction that Tinker draws here between accountings passive and representational role and its role as an informational commodity that promotes exchange. A telephone is an informational commodity that promotes exchange; but surely it does this by being passive and representing the speakers thoughts to the listener. One could conjure up a bizarre picture of a telephone that not only conveyed one partys thoughts to the other but became itself an actor in the exchange, Tinkers book leaves me with a strong suspicion that this is what he would like accounting to do. Another source of confusion in trying to interpret Tinkers views stems from the fact that most of the sins of capitalism, as he sees them, are visited on the heads of accountants. Accounting, it seems, has much responsibility for pollution, monopolies, and fraud, as well as other shortcomings of our economic system. We have already noted his view that accounting plays an active role in effecting exchanges and in arbitrating conflicts (a phrase that he uses more than once, by the way). Slaying the messenger that

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brings bad news, as they did in ancient times, is a custom that Tinker seems to approve of. Accounting reports on an economic system of which Tinker disapproves. Therefore, accounting is to be condemned.

ity unable to raise capital or to replace its equipment when it wears out.

THE RADICAL VIEW OF ACCOUNTING EDUCATION Accounting education does not emerge in a good light from Tinkers criticism of accounting. Here is a passage from his book that reinforces my view that it is society that is really the focus of his attack, not accounting.
Accounting education cannot escape unscathed from this discussion . . .. The accounting education system elevates monetary values as ends in themselves; the sucrogate role of money as a mere token expression of human and social needs is ignored. Marx distinguished between the surface appearances of market phenomenon and the underlying social structure that generates the appearances Accounting education appears to have outstripped Marxs worst fears in this regard: students are not merely taught to contlate appearance with reality; they learn to reify deceitful appearances and ignore the structure of social reaiity . . Ignorance of this kind multiplies when an accounting education system elevates profit and wealth as ends in themselves and iUs to articulate the so&i purpose of profit and its tenuous COMeCti0tI.S to social weifare (Tinker, 1985, p. 28).

RADICALACCOUNTING AND VALUE THEORY But there is more to it than that. The malign influence of accounting on society, as Tinker sees it, stems from the values that are attached to goods and services and resources by the marginalist theory of value in accordance with which our capitalist economy is regulated or self-regulated. I am at a total loss to understand what other values accountants could use. Tinker espouses a Marxist-Labor Theory of Value, which presumably he thinks would give relative values that would be more to his taste. I myself would be happy if teachers and nurses were better paid and business executives, Bhn stars and baseball players were less well paid. But it is obvious that it is society that would have to be changed, not accounting, to bring about such a result. It makes no sense at all to blame accountants for using values determined in the market when they are accounting for market transactions. There are, it is true, some transactions in which accountants play an active part in determining values. One is the case of regulated industries, such as public utilities, where accounting calculations of cost are used in determining utility rates. Another case is when a value has to be placed on a whole enterprise or a large block of shares in an enterprise that is changing hands. But here, too, there are limits to the values that accountants can determine, and there are other factors at work as well. The most important limit is set by the need for a business to be profitable if it is to survive. A corporation that changes hands at an inRated value will soon flounder if it cannot earn an acceptable rate of return on its investment; and public utility rates that are kept artificially low to benefit consumers will create a demand for state subsidies or will leave the util-

The idea that accountants should take on the task of looking beyond market appearances to the underlying social reality is, to say the least, farfetched. It is ditficult enough to get consensus as to what constitutes economic reality, a concept derived horn the fabric of mu&et phenomena. What hope could there possibly be of finding a consensus as to the nature of social reality that is somehow different from market realities?

POSITIVE ELEMENTS IN RADICAL ACCOUNTING: NEGLECTED CONSTITUENCIE!S There are, to be sure, some elements in radical accounting that should be taken seriously. One is the charge against what Tinker calls mainline accounting that it is biased in favor of one

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DAVID SOLOMONS This is only a small selection from a longer list of

or two of the constituencies that it should serve, namely, investors and, to a lesser extent, creditors, while other constituencies are neglected. At least this bias is recognized by the accounting rule-making body in the United States, the Financial Accounting Standards Board. The board has defended the bias, as regards general purpose financial statements, on pragmatic grounds, as follows:
To identify investors and creditors needs as the focal point of financial statement information greatly narrows the range of economic decisions and varied needs for specialized information that general purpose Enancial statemen= must try to sad@, thereby increasing the possibility that the statements can reasonably satis@ the narrower range of needs (FASB, 1976).

needs that the trade unions presented.

POSITIVE ELEMENTS IN RADICAL ACCOUNTING: EXTERNALITIES A second charge JeveJJe.d by radical accounting theorists against traditional accounting that needs to be taken seriously is its neglect of externalities. Accounting records transactions that an enterprise enters into, and it therefore takes account of costs for which the enterprise is Jcnown to be JegaJJy liable. But there may be other costs that it imposes on society for which, under present Jaws, it is not JegaJJy liable. These are not recognized in a companys records and therefore are not included in its financial statements. Examples of these social costs that may be cited are environmental pollution, the impact of plant closings on unemployment in a local community, the effect on health ofproducing noxious but not iJJegaJ substances such as tobacco, and the effect on the environment of erecting unsightly billboards on hitherto unspoiled roads. A particularly clear example of a private cost being transferred to the public arises when a producer of beer or soft drinks switches from using retumable containers to nonreturnables. The cost to society of disposing of the nonreturnable containers strictly should be a deduction in arriving at the ,producers social value added; but of course the social cost wiJJ not appear in the companys financial statements. There are positive externalities that go unrecorded also. Thus a company will record the cost of taking down a billboard but will not take credit in its accounts for the improvement in the environment that follows. The same is true for other acts of beautifkation, e.g. landscaping the area around corporate offices. The multiplier effect of increasing employment by opening a new plant may go far beyond the benefits directly accruing to the employer himself. Not aJJ externalities are the responsibility of business. As Robert Jensen puts it:
The well-known quotation from Pogo that the enemy is

That defense is not implausible, so Ear as general puipose fJnanciaJ statements are concerned. But there are other forms of financiaJ reporting that could have been developed to serve the information needs of other constituencies, notably labor and the consumem of the goods and services supplied by business enterprises. Accountants have shown little interest in meeting those informational needs. It is somewfiat di@JcuJt to generaiize about Fiat might be done to fiJJ these gaps, for more information is already being provided in some countries than in others - the gaps are not the same everywhere. American companies probably make more information available to investors and prospective investors than companies in most other countries. But even there, little thought is given to the needs of labor. Many of these needs were listed in a working paper prepared by the Trade Union Advisory Committee of the Organization for Economic Cooperation and Development (OECD) for a conference on harmonization of accounting standards convened by the OECD in Paris in April 1985 (OECD, 19B6). They include: -statistics of employee turnover, by categories of employee; - information bearing on job security, such as company plans for expansion and shutdowns; -shares held by insiders, e.g. management, family proprietors, etc.

A NEUTRALIST VIEW us implies that the public-at-large is a source of external diseconomies as well as being the damaged party. Responsibilities for automobile air pollutants, for instance, are d&At to pin solely on the manufacturers, because the drivers themselves are also partly to blame in terms of the condition in which they keep their cars, the way they drive, when they drive, etc. The beer can thrown on my front lawn was not thrown there by the Budweiser Com-

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pany (Jensen, 1976). Financial statements capture only those costs and revenues that are internal to an enterprise. This omission of external economies and diseconomies is significant for two reasons. One is that the contribution that an enterprise makes to society, its social value added, may be more or less than the value added that is reported in its statements. Thus its social performance is under- or over-reported. The second reason why ignoring social costs that are not recognized as private costs is significant is that they may make an enterprise liable for compensation to persons who suffer as a result of its activities. There have been four notable examples in the United States in recent years. The Johns ManvilIe Corporation has had to pay out huge sums to workers and others whose health was impaired by inhaling the companys asbestos. The A. H. Robins company was made bankrupt by claims from women whose health had suffered from the use of a contraceptive device, the DaIkon shield, made by the company. More dramatically, there has been the Bhopal disaster in India. It is too early to say whether Union Carbide has finally settled that matter. In none of these cases did the companys balance sheet show a liability for the compensation payable to the injured parties. The Union Carbide case is different from the other two, because the disaster was sudden and unforeseeable. But in the other two cases, costs were being imposed on society welI before the matter came into court. More recently there has been the Alaska oil spill. Although radical accountants are justified in calling attention to the problems caused by externalities, these problems have been under discussion for many years. The radicals have nothing new to tell us about how to measure the effects of externalities; and unless and until we

learn how to solve these measurement problems, this accounting failure is not likely to be remedied. I have now said alI I can say by way of approval of radical accounting. As I have said, what the radicals really want to change is our present form of society and its values. Their attempts to change accounting are almost incidental to their main purpose. How you view radical accounting will therefore depend largely on how you view our present social and economic arrangements.

SUPPLEMENTARY DISCLOSURE AS A MEANS OF CHANGING CORPORATE BEHAVIOR A desire to use accounting to effect or to inhibit social and economic change is not a monopoly of the radicals. Other accountants who would like to see accounting play an active part as a change agent can be divided into two camps. There are those who are content to encourage or to require supplementary disclosure by corporations about their social behavior, with the expectation that market forces or political pressures wiIl reward good behavior and penalize bad (Colantoni et a4 1974). And there are others who argue that accounting regulators should look to the economic consequences of accounting standards when formulating them, with a view to securing some allegedly desirable objective, e.g. to promote investment in a particular direction, or perhaps to inhibit some wealth transfers that might otherwise take place. The l%st group wants to influence corporate behavior by encouragement, the second by active involvement in the standard setting process. I shall calI this second group accounting activists. Most people will welcome improved reporting by companies on their social behavior so long as it comes about voluntarily. Presumably the companies will have addressed the costs of the disclosure and will have decided that it brings more than equivalent benefits. Mandated disclosures, on the other hand, must raise a question whether the costs are justified by the benefits to society. The fact that the disclosure was not made voluntariIy is not conclusive. The

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benefits to individual companies may fall short of their costs and yet for society as a whole the costs may be justified. In any case, supplementary disclosures of this kind for the purpose of modifying corporate social behavior, whether they are voluntary or mandated, do not impair the integrity of the financial reporting system. They may even improve it.

ACCOUNTING ACTlVISMAND ECONOMIC BEHAVIOR Accounting activists are not content to rely on disclosure to bring about changes in corporate behavior. They want to inlluence behavior more directly, but yet draw back from invoking direct interference by the govement. In a country like the U.S. where accounting rules and standards are spelled out with considerable precision, and where they are numerous and extensive as to their coverage, the activists see accounting standards, which are set by a private sector agency, the Financial Accounting Standards Board, as a ready means of intluencing economic activity that suits their particular ends. More often than not, as it happens, ir&luence is brought to bear toprevent a change, to maintain the status quo, by trying to block an improvement in financial reporting that the standard setting body is trying to introduce. There is some controversy among academics as to the magnitude and direction of the economic consequences of accounting standards, but there is no doubt that business executives take the alleged consequences very seriously.I am referring here principally to standards that change accounting measurements, not those that simply call for some change in the information that the preparers of financial statements have to disclose. Most standards do both. Two of the most important such standards worked on recently by the FASB are Statement of Financial Accounting Standards No. 87, Employers Accounting for Pensions (December 1985), and a proposed Statement, Employers Accounting for Post-

retirement Benefits Other Than Pensions, an exposure draft of which was issued in February

1989. The most important postretirement benefit other than pensions is health care coverage, but such benefits may also include legal services, tuition benefits and others. The amount of controversy generated by these standards can be judged by the fact that the subjects were put on the FASBs agenda way back in 1974. It took eleven years to get the pensions standard out. The controversy over Other Postretirement Benefits is still raging. Both of these standards have brought out the obstructionists, the opponents of change in financial reporting, in force. These standards are controversial for two reasons. They both involve much looking into the future and many assumptions about what future experience will be with respect to such matters as retirement age, employee mortality, levels of pay, future health care costs, rates of interest, and the value of assets (usually securities) set aside to fund pension and health plans. Actual experience is bound to turn out to be di@erent in some respects from the assumptions on which pensions and health care costs are accrued, with a resulting over- or under-accrual of those costs. Moreover, changes in the assumptions can greatly affect the present value of the benefit obligations disclosed in an enterprises financial statements. The many uncertainties surrounding the accounting for these benefits have made the whole subject an irritant in the eyes of many American preparers. The second ground for controversy, which is even livelier in connection with other benefits than with pensions, arises because many enterprises have been content to deal with such benefits on a pay-as-you-go basis, treating benefits as an expense when they are paid out and making no provision for them during employees working lives, as the proposed new standard will require them to do. The recognition of these obligations, even allowing for the gradual phasing in required by the proposed standard, will have a major impact on financial statements and is decidedly unpopular with American industry. The gap that separates what is conceptually pure and what is politically feasible for standard setters was vividly illustrated by the FASB in its 1985 standard on pensions, when it admitted

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with disarming frankness (in paragraph 107) that the gradual amortization of actuarial gains and losses (which the standard requires) rather than their immediate recognition was not ideal. The Board, it says, believes that it would be conceptually appropriate and preferable to recognize a net pension liability or asset measured as the difference between the projected benefit obligation and plan assets, either with no delay in recognition of gains and losses, or perhaps with gains and losses reported currently in comprehensive income but not in earnings. However, it concluded that those approaches would be too great a change from past practice to be adopted at the present time. The reason for the delayed recognition of gains and losses in the Boards standard is the opposition among many of its constituents to the volatility that would be introduced Into financial statements if the gains and losses were fully recognized as they occurred. No matter that volatility is a fact of life. It does not belong, it seems, in financial statements, whatever the representation of economic reality might require.

ANEXTREME ACTMST VIEW This example of the FASBs bending to political pressure is a mild one. The result, it seems to me, is to subordinate faithful reporting of financial information to what is politically acceptable to the Boards constituents in industry. If, one day, that constituency becomes more enlightened, it may be that faithful representation will prevail. But one can find more striking examples where the Board has been urged quite openly to subordinate sound accounting to the alleged economic effects that might follow from a new accounting rule or a change in an old one. Some rich examples of this point of view will be found in an Emanuel Saxe lecture by David Hawkins, delivered at Baruch College in New York City in 1973. Hawkins argued there that . . . because the [Financial Accounting] Standards Board has the power to influence economic behavior it has an obligation to support the governments economic plans (Hawkins, 1975, p. 11).

His lecture is studded with examples of how this might be done. The Board at that time was considering a new standard on leasing, and it was expected to require that long-term leases, which at the time were noted in financial reports but were not required to be included an assets and liabilities in the balance sheet, should be so included. Hawkins argued that putting leases on the balance sheet might raise the cost of financing for certain industries and therefore the board should go slow in pressing for lease capitalization in a period of economic recession. The Board did not take Hawkinss advice. On the subject of accounting for research and development, he argued that because a requirement to expense such costs might make it more dUBcult for small high technology companies to raise capital for growth, the Board should not outlaw the capitalization of R&D altogether. On this matter, too, the Board declined to follow Hawkinss advice. Another example from Hawkins demonstrates to what absurdities an activist approach can lead. After reviewing some earlier advice he had given to the Accounting Principles Board In 1962 urging them to reject the flow through treatment of the investment tax credit at that time because he assumed it was unsound behavior to adopt an accounting method that encouraged corporations to earn material profits immediately by purchasing assets, he explains why he later changed his mind.
Such an approach may have been acceptable and tolerated by the economic ptiers ifthe ~nomywas strong and untroubled. But the economy waswkak and troubled . Under these conditions 1 believe now it was irresponsible for me to urge the [APB] to deliberately take action which would lessen the e&ctiveness of the tax credit in a situation where sound accounting arguments could he made for both the deferral and flow through approaches (Hawkins, 1975, p. 16).

In other words, what is sound accounting when the economy is strong is unsound when the economy is weak. One can conjure up a picture of a standard setting body wetting its collective finger and holding it up to the wind to see if it is blowing hot or cold, and then formulating a standard accordingly.

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GAAPVSRAP The recent debate about GAAP vs RAP (Regulatory Accounting Practices) in connection with the savings and loan association (SLA) fiasco has provided another striking example of the subversion of accounting to supposedly serve social ends. Generally accepted accounting principles clearly require that ifa financial institution is insolvent, its financial statements should show it as being insolvent. But various regulatory accounting devices have been used to hide the fact of insolvency. One device was to disguise the negative net worth of insolvent SLAs taken over by sound institutions as goodwill in the balance sheets of the acquirers. Another device was legalized in the Competitive Equality Banking Act of 1987. Under this Act, agricultural banks may be permitted for regulatory purposes to defer and amortize loan losses over a period of up to 7 years, rather than recognize such losses immediately. In addition, regulators may permit an agricultural bank to reappraise real estate or other property acquired as a result of a default on an agricultural loan and defer such losses, if any, and amortize over a period of 7 years. The statements prepared for use by regulators that incorporated these devices did not purport to comply with GAAP. Their only purpose was to preserve an appearance that the SLA or bank that was in trouble was complying with regulatory requirements that, if breached, would require the institution to be closed down. Thus, in the long run, they may have contributed to the magnitude of the insolvencies. Of course, it would have been just as easy, and certainly more honest, for the regulators to waive or relax the regulatory requirements, but that would have made the fact of insolvency, or at least losses, apparent.

view the accounting radicals and accounting activists. I believe they are both misguided, though for different reasons. The radicals really want to change society, and accounting is merely incidental to that desire. The activists want to use accounting to change society, usually in quite small ways, or they want to preserve the status quo by obstructing change. Accountants, as citizens, should be as much concerned to bring about desirable changes in society or to prevent undesirable changes as anyone else. But as accountants that is not their job, and they have no special expertise in that direction. Their job is to portray certain aspects of society, not to change it. There are other and better ways to do that. If accounting is to retain any credibility-and without credibility it is worthless - its guiding light must be neutrality in financial reporting. The FASB has defined neutrality as the absence in reported information of bias intended to attain a predetermined result or to induce a particular mode of behavior. This is a guidepost that all standard setting bodies should follow, and the FASBs record in this respect has been good. Dennis Beresford, the chairman of the Board, reatkmed the importance that the Board attaches to this concept in an address on 1 November, 1988 to a gathering of financial executives. Neutrality, he said, is written into our Mission Statement as a primary consideration. And the neutrality concept dominates every Board meeting discussion, every informal conversation, and every memorandum that is written at the FASB. In a May 1986 address by Arthur Wyatt, then a member of the FASB, there is a clear recognition that neutrality is not always easy to achieve.
The Board believes that its conclusions should be as neutral as they can be when considering the various competing interests within our society . Being neutral in this activity does not mean being unaware of potential consequences, but it does mean focusing on the accounting and economic issues and submerging other biases that might intluence the conclusions reached As private

A PLEA FOR NEUTRALITY There should by now be no doubt as to how I I-

Pnxeedings of the October8, 1987 Roundtable Discussion on GenerallyAcceptedAccountingPrtnciplesandRegulatoty Accounting Practices, ed. Jerry Arnold (Los Angeles: SEC and Financial Reporting Institute, School of Accounting, University ofSouthern California). p. 59.

A NEUTlL4UST VIEW sector standard setters.. our mission is to establish and improve standards of financial accounting and reporting so that decision makers have available credible, concise, and understandable Enanciaf information. That mission precludes placing any particular interest above the interests of the many who rely on Enancial information (Wyatt, 1986). I draw attention to Wyatts recognition that neutrality means submerging other biases that might influence the conclusions reached. Radicals like Tinker question whether reported information can ever be neutral, because the preparer will always have some biases that will creep in. The bias may be due to a desire to avoid taxation, or to increase managerial bonuses, or to keep reported profits down to avoid public censure for overcharging, or, for those who see accounting as an instrument of the class struggle,

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to benefit capital at the expense of labor. It is perhaps true that perfect neutrality of information can never be achieved. But it would be as foolish to stop seeking it on that account as it would be to stop trying to reduce air and water pollution because completely pure air and pure water can never be attained, or to stop seeking fair-minded judges on the ground that no human being is entirely free from bias, or (to return to an analogy that I used earlier) to stop esteeming journalists who know the difference between reporting and editorializing. We know how much credibility newspapers have in totalitarian countries. If those responsible for regulating accounting ever abandon neutrality as a guiding light, accounting will have lost all value as a provider of useful information. It would then be no more than an exercise in futility.

BIBLIOGRAPHY
Colantoni, C., Cooper, W. W. & Dietzer, R., Accounting and Social Reporting, in Objecrives of Financial Stute?nents, Vol. 2 (New York: American Institute of Certified Public Accountants, 1974). Financial Accounting Standards Board, Tentative Conclusions on Objectives of Fiiciaf Statements of Business Enteprises (Stamlbrd, Conn.: FASB, 2 December, 1976). Financial Accounting Standards Board, SFAS No. 87, Employers Accounting for Pensions (Stamford, COM.: FASB, December 1985). Hawkins, D., Financial Accounting, The Standards Board and Economic Development, Emanuel Sure DistinguisbedLe fn Accounting 1973-74 (The Bernard M. Baruch College, City University ofNew York). Jensen, R E., Pbantasnwgoric Accounting: Research and Analysis of Economic, Social and Envf~menkal Impact of Corporate Business, (American Accounting Association, Studies in Accounting Research, NO. 14.1976). Organisation for Economic Cooperation and Development, Harmonization of Accountfng Standunis Achievements andProspecb3(l?wis OECD, 1986). Tinker, T., Paperprophets (New York: Praeger Publishers, 1985). Wyatt, A. R., Standard Setting: Process and Politics, FASB Status Report No. 179 (Stamford, Conn.: FASB, 1986).