The global integration of markets and competitive conditions has reached levels that were unimaginable even a few years ago. Accounting techniques are being thoroughly transformed by this major business fact. In fact, national book-keeping and accounting procedures cannot remain sheltered from globalization. Balance sheets and financial reporting are not cumbersome administrative duties bearing potentially adverse consequences, or obscure issues of book-keeping best left to a studious and inoffensive species of Men in Black. Particularly in Italy, there is a widespread notion that balance sheets are things that have little relation with the actual practice of management.
Big mistake: Ms. Globalization shows up one day and makes people notice the Emperor has no clothes. Because the balance sheet is far from being a mere bureaucratic formality. And we’re not venturing here into moralizing sermons about the Enron or Parmalat baddies, but talking about the fact that balance sheets have become fundamental acts of communicative knowledge. This is by no means an academic flight of fancy, but rather a reflection on the fact that company books show the identity and image of a firm, along with its historical performance and economic potential. The balance sheet is about being and ways of being of a company, including its potential for being.
It’s not only a problem of credibility and acceptance of financial reporting. That fact is that businesses need weapons for competition and the balance sheet is one of them. Dealing with accounting means dealing with strategic issues of competitiveness and corporate dynamics. Many Italian accounting academics need to shed a nefarious wait-and-see attitude, while they repeatedly congratulate themselves about the historical Italian primacy in accounting studies and book-keeping techniques, and start appropriating and dominating the new dimensions of the profession, with a bit of justified detachment, well aware there are no accounting panaceas in this world.
The borders of the discipline are thus undergoing a paradigm shift, and crossovers with legal and, increasingly, mathematical studies will soon become the norm. Remembering geniuses like Fibonacci and Pacioli and the mathematical origins of book-keeping, I would welcome a decisive trend toward “accounting positivism”, and away from those accounting books without figures that all too often are released in Italy in spite of their self-evident obsoleteness.
by Maurizio Pini,
Associate Professor of Business Accounting, Università Bocconi