SYNOPSIS: Rules are fundamental to financial reporting, tax regulation, and auditing processes, and therefore the limitations of rule-based structures are of primary interest to accountants. All rule systems are plagued by the problem of vagueness, which implies that some very important decisions cannot be objectively described as “right” or “wrong,” and must be based on an authority’s judgment. This problem becomes most acute when accounting faces rapid technological changes, financial engineering, creative tax planning, or changes in the way that business is done. If the environment were static, explicit rules could eventually be developed for each category and consulted when making classifications. In contrast, dynamic environments present new problems characterized by vagueness. In this paper, I will review several definitions of vagueness, and show how they are tied to a conceptual framework. In particular, I will discuss the potential roles of verifiability, relevance, and consistency under any feasible (vague) conceptual accounting framework.
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Research Article| September 01 2008
Rules and Accounting: Vagueness in Conceptual Frameworks
Online ISSN: 1558-7975
Print ISSN: 0888-7993
American Accounting Association
Accounting Horizons (2008) 22 (3): 339–351.
Mark C. Penno; Rules and Accounting: Vagueness in Conceptual Frameworks. Accounting Horizons 1 September 2008; 22 (3): 339–351. https://doi.org/10.2308/acch.2008.22.3.339
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