Mind blown -- or is it?

Jun. 26, 2017  |  Faye Hayhurst, CPA

The first time I thought about being an accountant was in 6th grade, when we had to pick a possible career to write about. My big brother was studying accounting at a vocational school at the time, and his influence prompted my choice.

Two years later, my big brother moved away and prevailed upon me to take over the treasurer duties for our church youth group. What was a little unusual was that my brother had set up a general ledger and general journal for our little cash basis youth group’s finances, all maintained by hand in columnar ledger books (this was the 1970s). At age 14, I soaked in his instruction on how to record transactions and vowed to make my brother proud. I meticulously accounted for every dollar in and out of that group and loved how it all fit together.

I can’t say I was passionate about all my accounting classes in college, but my overall satisfaction with the principles, purpose and value of accounting stayed with me. Everything must balance, the debits have to equal the credits, it all has to work out, etc. I have even become known in my extended family for referring to double-entry bookkeeping as “a thing of beauty.” (That influential older brother, who’s had a career as a highly successful consultant, is known for his affinity for columns and rows. Hey, I can’t argue with his love of order and the power of those vertical and horizontal categorizations.)

Although my career path has taken me well beyond T-accounts and recording debits and credits, I’ve always built upon that unshakeable foundation. Tax laws may come and go, audit philosophies change, but the debits and credits are eternal. Or so I thought.

Recently, however, I read an article that shook me to my accounting core. The headline sounds innocuous enough: “Double-entry accounting in modern times.” Writer Tom Selling maintains that over the centuries since Italian monk Luca Pacioli published an exposition of double-entry bookkeeping in 1494, “a chasm between double-entry accounting and the actual economic events affecting an enterprise has emerged.” He makes two key points:

  • Some assets are missing from the balance sheet, and those that are there are valued in different and sometimes arbitrary ways. I get this: A brand or customer loyalty may have tremendous value, but be absent from the statement; recorded assets may be at fair market value, for example, or at historical cost in others. (And by the way, has LIFO ever made sense?)
  • Standard setting bodies have set differing rules for the recognition of assets vs. liabilities, as well as their subsequent measurement.

Mr. Selling thinks we all need to acknowledge the truth and start thinking about alternatives. He argues that not only is the balance sheet broken, but why does it even have to balance in the first place? And current earnings measurements are essentially worthless.

Say whaaaat? Is my “thing of beauty” suddenly an ugly and obsolete item to be tossed on the trash heap? Are GAAP financial statements meaningless? Has it all been a lie??!

The honest answer I come to for all of these questions is really “it depends.” I can’t argue that current GAAP may be inadequate for an organization that has sophisticated/difficult to measure/unusual assets and liabilities. Let’s face it — there is no easy answer to trying to use numbers to accurately represent every economic reality.

However, for many organizations, my own included, double-entry accounting still provides a sound way of telling our story. I have no reservations in defending the usefulness and relevance of the financial statements I prepare and the conclusions a user will draw from them.

I’m resolved to be open to challenging my long and dearly held ways of looking at things, and I encourage everyone to give their brain a workout by reading Selling’s proposition. It’s healthy to consider new approaches to telling a financial story in a way that is truthful and gives the reader a clear understanding. But expanding my mind to think about these new concepts doesn’t blow out my love of a centuries-old system – at least not yet.


Topics: Accounting and auditing

Faye Hayhurst, CPA

Faye Hayhurst is the MNCPA director of finance and administration. She is committed to using numbers to tell relevant stories, although she also employs words, charts and occasionally clothing to communicate a message. While some have questioned her about the pressures of being the CPA for the MNCPA, Faye considers presenting financial information to fellow CPAs a dream job. Outside of storytelling with numbers, Faye enjoys directing her church's handbell choir, visiting national parks and other scenic places, and checking out the chocolate products at Trader Joe's. Faye can be reached at 952-885-5540 or

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