Over two years ago, I put up a post called Cost Accounting and Lean Accounting as a Fourier Pair. That post has turned out to be one of the most popular on this blog. The point of the post (which is short -- go read it) is that the way accounting information is collected and reported through financial statements is not optimal. The post concludes with the following recommendation:
Financial statements should report average turnover rates for each balance sheet account.
And on Friday, the SEC unanimously passed a rule requiring something even better:
Under the proposed rule, all companies would have to disclose not only how much debt they have at the end of the quarter but also average and maximum figures during the quarter.
Technically, a turnover rate would give you the same information. But the average and maximum figures are easier to understand, and hence probably harder to game.
I like to think that somebody involved with the proposal -- directly or indirectly -- might have seen or heard about the post. Either way, I'm very happy. I think this is one of the most significant advances in accounting rules since the invention of double-entry bookkeeping.
Comments