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Gaffikin (2008, p - Cardiff Business SchoolP

The prevalent Accounting Equation: Sign or referent in determining

    an entity’s real wealth?

    By Sudhir C Lodh*

    &

    Michael JR Gaffikin**

    Paper for inclusion in the IPA Conference 2012

    11-13 July, Cardiff, UK

    * Corresponding Author: Dr Sudhir Lodh | Senior Lecturer | School of Accounting and Finance | Faculty of Commerce | University of Wollongong NSW 2522| Australia ( +61 2

    slodh@uow.edu.au 4221 3731| *

    ** Emeritus Professor Michael J. R. Gaffikin, School of Accounting and Finance, University

    of Wollongong, Australia

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The prevalent Accounting Equation: Sign or referent in determining

    an entity’s real wealth?

    ABSTRACT

    This paper explores a general validity of the prevalent Accounting Equation in determining the real wealth and accountability discharge through contemporary financial reporting. In so doing, an augmented accounting framework is developed in order to indicate the gaps that may arise in the Accounting Equation; which is inherent in the system if compared among different layers sign to alleged to referent

    (Baurillard 1983, 1994; MacIntosh 2000, Ijiri 1986, and Mattessich 2003). We argue that this augmented framework will help in enhancing our understanding, at least at the level of pedagogy within the domain of fair value accounting and for corporate governance and discharging social responsibility, about the missing elements and the nature of financial reporting and therefore, reduce the blame games of maintaining objectivity and neutrality about information provision for an augmented reality of wealth (economic or otherwise) for an entity.

    Key words: The Accounting Equation, Financial Reporting, Accountability, Real Wealth, Augmented Accounting Framework; Accounting Measurements, Fair Value.

     2

INTRODUCTION

    The (prevalent) Accounting Equation [A=L+E or A-L = Wealth] is a derivation of the

    double-entry bookkeeping system (cf. Pacioli 1494) first expressed in its algebraic th century (cf., Sprague 1880). This duality form by Charles Sprague in the late 19

    check applying such an equation is to explain or to account for changes in the net

    balance in wealth accounts based on the underlying causes that are responsible for the change (Ijiri 1989). Over the last century several authors have elaborated on the double entry bookkeeping for financial reporting and/or preparation of financial statements, for example, Chatfield (1974), Littleton (1933, 1968), Patton and Littleton (1940), Sweeny 1936, Littleton and Yamey (1956), Hatfield (1930) and Ijiri, (1986, 11989). It (duality check) essentially ties in with the comparison between wealth and income using a collection of flows that have occurred in past events which are considered to be transparent, transaction based and objectively measured. Financial reporting including the preparation of financial statements, is primarily an outcome of such an application, its purpose, according to Statement of Accounting Concepts SAC 2 (in Australia the objective of general purpose financial reporting ) being to provide users with information about a reporting entity which is useful for making and evaluating decisions about the allocation of scarce resources. (Financial Reporting Handbook 2009, p.3) When, for example, the general purpose financial reports (GPFR) can meet this objective it will then ultimately be indicative of discharging the accountability to those users by the management and the governing bodies of the reporting entity. (Financial Reporting Handbook 2009, p.3) But, in recent years several authors have cast doubt on whether the conventional accounting framework (expressed formally in various Conceptual Frameworks) is able to display the absolute economic (and social) reality and accountability in totality in a dynamic environment through such conventional financial reporting (viz, Miller and Napier 1993, MacIntosh et al. 2000 and Baker 2006). There are many reasons for such a view. For example, Miller and Napier (1993) argue that ―accounting changes in both

    content and form over time; it is neither solid nor immutable‖. (p.631) MacIntosh et

    al (2000) argue that: (m)any accounting signs no longer refer to real objects and events and accounting no longer functions according to the logic of transparent 2representation, stewardship or information economics‖. (p.13) Baker (2006) argues

    that ―the form of an accounting display has no relationship with the economic ‗reality‘ which the display purportedly represents‖ (p.678)

    In a Presidential Scholar address at the AAA meeting August 2008, Palmrose (2009) explored the fundamental question of whether accounting is at a crossroads of its own conception. She argues that:

    We may need to draw on paradigms other than the traditional ones, like economics and psychology from social sciences… In centuries past, the guiding lights of double-entry accounting were people well connected to the larger scientific communities of their times. So perhaps, once again, science can inspire, as we take stup the challenge of reconsidering the foundations of accounting in the 21 century.

    (p282)

     1 The purpose of this paper is not to deal with the historical development of single-entry or double-entry bookkeeping system however.

    2 In order to advance this thesis they used Jean Baudrillard‘s theoretic on postmodernity.

     3

Palmrose further emphasises that the (US) Conceptual Framework is not particularly

    helpful for students (of accounting) when considering how to understand GAAP and they apply to answer real-world questions. (p289) She argues that it was necessary to

    find such answers and face the reality of financial reporting which will ultimately reflect a fair representation and usable for decision usefulness. For her ‗we need to

    understand the basics‘ including the Accounting Equation. She further claims that ―we

    have lost touch with our accounting foundations somewhere along the way‖ (p 292) It

    is the complexity (measurement gaps) and invisibility (as far as the accountability gap is concerned) which has been a major theme threading through the truths of inconvenient accounting. Clarke and Dean (2007) also argue that ―financial disclosure in accord with conventional accounting generally fails to disclose a company‘s wealth and progress and that the newly heralded IFRSs (International Financial Reporting Standards) will do little to remedy that‖. (p12)

    These contradictions give rise to a question as to whether or not the application of the conventional accounting equation only will lead to fully capturing the dynamic nature

    of accounting realities and their underlying consequences. In order to exemplify the dynamic nature of accounting and its duality check to assess the underlying reality in

    measuring wealth as well as forces (Ijiri 1986, 1989) and fair (or otherwise) values

    allegedreferent emphasis added) we argue that there is a at three layers (sign??

    necessity to develop an augmented framework that can exemplify the missing 3elements.

    We have used three language sets or metaphors (ie, sign, alleged and referent) to

    develop an augmented framework in order to show the missing portions of the Accounting Equation that should be considered in determining economic reality (wealth) and discharging accountability at these comparative layers in a dynamic environment. In particular, we have considered two of these language sets sign and

    referent - from Baudrillard (1983; 1994a, 1994b) which have already been used in the accounting literature (cf. MacIntosh et al, 2000 and Mattessich 2003). The third

    lleged (or imaginary), which is taken metaphor or language set we have used here is a

    from the existing accounting literature (cf. Ijiri 1986, 1989, Mattessich 2003, and Ravenscroft and Williams 2009). The uses of these metaphors, we believe, at least will enable us to open up the debate and/or the ‘black box‘ (Latour 1987) at least at

    some level of appreciation as to what makes the gaps as far as the missing portions of the accounting equation‘ is concerned and to develop an augmented framework. In

    particular, the use of these three metaphors sign, alleged and referent - is to create

    arbitrary positions to show a comparison of wealth and accountability determinations for these layers and their plausible pervading interdependencies that can shed light on the historical roots of the development of accounting as well as the prevailing gaps/differentials that are inherent in the conventional accounting equation in 4representing economic reality and discharging accountability at different ―layers‖

    (Mattessich 1987, 1989, 1995, 2003).

     3 We are not attempting to provide here the determination of the missing elements at all micro levels, rather we make an attempt to elaborate plausible missing elements at an aggregate level in the prevalent accounting equation in determining the absolute economic (or otherwise) wealth through a duality check, if needed. 4 Mattessich (2003, p446)) reiterated his earlier work (Mattessich 1995) in ―The Onion Model of Reality) (OMR) and argued that ―The OMR belongs to the same family as the ontological theories of Hartmann, Campbell, and Lorenz, but with some differences. It regards the layers of reality as dependent on and inclusive of each other, like those of an onion. It also conceives of these different levels from a multidimensional perspective that includes time and other dimensions, instead of seeing

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Ravenscroft and Williams (2009) argue that:

    Root metaphors are particularly significant to any discipline, because such metaphors delimit the implicit assumptions of what is real, what is significant, how things relate, what can be known, and how it can be known. The root metaphor thus informs and reflects both the implicit epistemology and metaphysics of a discipline. (p 772)

    For example, Ravenscroft and Williams (2009) further argue that the adoption of an information metaphor has thrust on accountants the responsibility of making an imaginary (alleged) world which can reflect economic wealth better, or, at least, can be useful to the users of financial reports. We believe the usage of the above metaphors will be helpful in making sense about the inequality in the extant Accounting Equation (of course, at the aggregate level) if ALORE (Asset, Liability, Owners equity, Revenue and Expense) items are measurable at various ‗layers‘

    (Mattessich 1995, 2003) of comparison; provided the realer (Bougen and Young

    2011) can make all ALORE items real‘ at the referent level (emphasis added) in the

    preparation of financial statements. To reiterate, it is obvious in our view, differentials between ‗left‘ and ‗right‘ side of the accounting wealth determination, as

    always, can arise due to either inadequate measurement tools or expectation differences in the deliberations of accountabilities in a given context and space-time. However, instead of considering all the ALORE items individually here we would like to show how our concept of an augmented framework can be applicable to various facets of accountings‘ representations including the fair value accounting.

    Laux and Leuz (2009) argue that ―the fair value debate is far from over and much remains to be done‘. (p 833) There have been many attempts by the IASB to

    converge conceptual framework projects with the FASB in order to improve completeness and consistency (Whittington 2008). According to Whittington (2008, p 142), the most obvious gap is about the development of guidance on measurement. But, we will argue that, in addition to the measurement gap, there are obvious gaps in relation to discharge of accountability to users of financial reporting and the greater community. Therefore, in considering both measurement and accountability gaps an example of the debate on fair value determination will be undertaken at our selected three layers: sign, alleged and referent. It should however be mentioned that it is not

    claimed that this paper attempts the identifications of all detailed elements of the plausible gaps of measurement and accountability discharge of financial reporting that may arise in reality. Rather, the intention is to indicate the missing portions of the

    Accounting Equation, and thus, the urgency is the development of an augmented framework. To make this framework workable in practice, we argue that there is a need for advanced systems to be developed to identify the missing elements (ie, gaps) depending on the layers and contexts under consideration.

    The organisation of the rest of the paper is as follows. First, a theoretical prelude in

    relation to the use of three metaphors or language sets: sign, alleged and referent - is

    presented. Second, the debate on the duality check using conventional accounting in

    assessing economic reality is explored. Third, an explanation is provided for how

    these metaphors in representing the economic realities along with accountability

    the layers in a linear and one dimensional way.‖ Our analogies of the usage of sign, alleged and referent is somewhat similar to Mattessich‘s analogy of the OMR; but the question remains as to how big or small the onion will be. Is it knowable at a given time and space? Also, what would be the ways one could determine the layers of realities using certain epistemic positions?

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    discharge and their comparative differences between layers are applicable individually. In so doing, an augmented framework is proposed to include the missing portions (in a dynamic environment, of course) to the prevalent accounting equation. Fourth, an example is provided as to how comparative fair values between layers under consideration give rise to gaps or differentials using our augmented framework. Fifth, convincing arguments are forwarded for the usefulness of our augmented framework, at least, at the level of pedagogy and for corporate governance. A conclusion is drawn in the final section.

    THEORETICAL UNDERPINNINGS

    There has been a plethora of ongoing debates on the underlying realities (economic or

    otherwise) that the accounting discipline can represent (cf. MacIntosh 2000, Mattessich 2003, Mouck 2004, Backer 2006, Bougen and Young 2011). This reflexivity on the representation of underlying realities in accounting (especially financial and fair value reporting) is not just serendipity however. In our view this thematic/fundamental issue has a considerable history. As far as the measurement literature is concerned it can be traced back from 1960s (cf. Mattessich 1964, Chambers 1965, Sterling 1970a, Vickrey 1970, Ijiri 1972, Beaver and Demski 1979, Beaver 1991, Willett 1987, 1988, Salvary 1989 and Gibbins and Willet 1997). Irrespective of the approaches undertaken or normatively put forward whether it is neoclassical or otherwise, so far, there is no agreed theory on measurement which could trace the referent (emphasis added) in order to trace the real wealth of an enterprise. However, we used two metaphors such as sign and referent from the work

    of Jean Baurdrillard (1983, 1994a, 1994b), therefore, there is a need for an elaboration of the theoretical underpinnings of these terms. We are not the first to use these terms; these metaphors have already been used in the accounting literature including MacIntosh et al (2000) followed by Mattessich (2003). Mattessich (2003) used these terms to exemplify the thematic issues of MacIntosh et al (2000), of course, with some reservations. We are using these metaphors here to create arbitrary positions in order to show the missing portion(s) of the accounting equation and to develop an augmented framework.

    MacIntosh et al (2000, p 14) argue that:

    Baudrillard uses his ideas about simulacrum, implosion and hypereality to

    propose a radical description of postmodern society. Briefly, simulacrum is a sign,

    image, model, pretence, or shadowy likeness of something else. Implosion occurs

    when the boundary between two or more entities, concepts, or realms, melts

    dissolves or collapses inward and their differences disappear. Hyperreality refers

    to the current condition of postmodernity where simulacra are no longer

    associated with any real referent and where signs, images, and models circulate,

    detached from any material objects or romantic ideals.

    MacIntosh et al (2000, p 16) further argue that:

    For many of today‘s pressing accounting issues, there is no underlying reality to

    which accounting signs referThe idea of accounting as a sign, a faithful

    representation of physical and social realities in space-time, is pervasive. Indeed,

    the assertion that historical cost accounting keeps track of resources (a physical

    reality) under the control of entities (a social reality) is an axiom in virtually

    every text following Paton and Littleton‘s (1940) influential work (Ijiri 1980).

    In a boarder sense, following Jean Baurdrillard‘s work, according to MacIntosh et al

    (2000), the signs can be created by observing the impressions or following the

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    5 In this sense, the current Conceptual Framework(s), existing rules and principles.

    regulations and standards including EDs (Exposure Drafts), IFRS (International Financial Reporting Standards), SFAS (Statement of Financial Accounting Standards) and IAS (International Accounting Standards) can be considered as part of the creation of signs for the preparation of GPFRs. On the other hand, the term referent is

    indicative of tracing actual resources or obligations. Jean Baudrillard used the terms sign-to-referent in a cultural (social) context; which may have different theoretical underpinnings. But, for our purposes, we argue that these language sets do give us a skeleton (Laughlin 1995) structure to view the gaps and indicate the missing elements to the current Accounting Equation. MacIntosh et al (2000) argue that, in Sumerian urn-accounting, signs might refer to real physical resources. They went on to argue that this premise might have even persisted in the most sophisticated financial accounting practices that prevail in today‘s practice because, according to McIntosh et

    al (2000), accounting now-a-days deals with more complex transactions and uses money as a numeraire. This is a reason why they cast doubt on financial reporting and questioned whether every dollar on a balance sheet (statement of financial position) can be traced to an actual resource or obligation of an accounting entity, just as every token in an urn or impression on an urn could be traced in ancient times‖.(p 16) They

    further argue that the same sign-function seems to underlie historical cost accounting practices, which struggle to sustain the belief that contemporary accounting represents reality in much the same way as it did for the ancient Sumerians‖. (p 16)

    Mattessich (2003), in a footnote, states that, according to Baudrillard, signs can be

    regarded as being an imitation of a real event (p 460 footnote 22). However, we are

    reiterating the use of the metaphor of sign as a function of creating an impression in

    measuring or identifying issues of accountability in financial reporting through following the existing rules and standards that are employed in today‘s financial

    reporting (e.g., IFRS, IAS, etc); which can be seen as an epistemic objectivity as

    proposed by Mouck (2004) and Baker (2006) who used Searle‘s (1995) work. In

    order to pursue our arguments further we need to elaborate the term ‗Simulacra‘;

    which is considered by several accounting researchers (Bougen and Yong 2011, MacIntosh et al 2000).

    5 However, according to MacIntosh et al (2000): ―Given that the language and discourse dominate the nature of being in postmodernity, Baudrilard draws on his radicalization of Saussure‘s semiotics for his epistemology. Saussure, concerned only with the form of language, identified four elements in his theory of structural semiotics: signifiers (words written or spoken); signified (the mind image invoked by each word); signs (one-to-one combinations of unique signifiers with particular signified); and referents (the real objects or ideas to which sign refers). Both the sign to referent and the signifier-to-signified relationships, Saussure (1959) revealed, are arbitrary, so sign has no meaning to its own. It has meaning only because it differs from all other signs in its linguistic system.‖ (p 15)

    Baudrilard also pays particular attention to the sign-to-referent relationship but proposes four successive phases or eras of the sign. (He refers to the sign variously as simulacrum, image, and model.) In the first phase, the sign is a reflection of a profound reality. (p xx)

    MacIntosh et al (2003) further argue that the sign is deemed to be ―a good appearance in the sense that

    it is a faithful and transparent representation‖. (p 15) In this sense use of prevalent IFRS or IAS or

    consensus standards is a good appearance to represent profound reality.

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Baudrillard‘s theoretic on ‗The orders of Simulacra’ first appears in English with ‗The 6Precession of Simulacra‘ in the volume Simulations (Baudrillard 1983). Indeed, as

    Butler (1999) argues it was an attempt to criticise Michel Focault‘s famous The Order

    of Things (Foucault 1977). Butler (1999) argues that Foucault‘s attempt was to write a history of representation, Baudrillard‘s attempted to write a history of simulation that

    will in a sense be critical of the realist pretensions of Foucault‘s effort. (p35) In ‘The

    Orders of Simulacra’, Baudrillard (1983) identifies three different orders or stages of 7simulation: the counterfeit, production and simulation itself. Baudrillard (1983)

    argues that:

    Abstraction today is no longer that of the map, the double, the mirror or the

    concept. Simulation is no longer that of a territory, a referential being or

    substance. It is the generation by models of a real without origin or reality: a

    hyperreal. The territory no longer proceeds the map, nor survives it.

    Henceforth, it is the map that precedes the territory precession of simulacra

     it is the map that endangers the territory and if it were to revive the fable

    today, it would be territory whose shreds are slowly rotting across the map. It

    is the real, and not the map, whose vestiges subsist here and there, in the

    deserts which are no longer those of the Empire, but our own. (p 2) Baudrillard (1983) further argues that a hyperreal is sheltered from the imaginary, and

    from the distinction between the real and imaginary (p 4). He provides an example of Disneyland in USA to elaborate the difference between real and imaginary concept. Baudrillard (1983) argues that:

     6 In relation to simulacrum there are many views. The following statement is downloaded from a Google site which elaborates on it as follows:

    The simulacrum has long been of interest to philosophers. In his Sophist, Plato speaks of two

    kinds of image-making. The first is a faithful reproduction, attempted to copy precisely the original. The second is distorted intentionally in order to make the copy appear correct to viewers. He gives an example of Greek statuary, which was crafted larger on top than on bottom so that viewers from the ground would see it correctly. If they could view it in scale, they would realize it was malformed. This example from visual arts serves as a metaphor for philosophical arts and the

    tendency of some philosophers to distort truth in such a way that it appeared accurate unless viewed from the proper angle. Nietzsche addresses the concept of simulacrum (but does not use the

    term) in The Twilight of the Idols, suggesting that most philosophers, by ignoring the reliable input of their senses and resorting to the constructs of language and reason, arrive at a distorted copy of reality. Modern French social theorist Jean Baudrillard argues that a simulacrum is not a copy of

    the real, but becomes truth in its own right: the hyperreal. Where Plato saw two steps of

    reproduction faithful and intentionally distorted (simulacrum) Baudrillard sees four: (1) basic

    reflection of reality, (2) perversion of reality; (3) pretence of reality (where there is no model); and (4) simulacrum, which ―bears no relation to any reality whatsoever.‖ Baudrillard uses the concept of God as an example of simulacrum. In Baudrillard‘s concept, like Nietzsche‘s, simulacra are perceived as negative, but another modern philosopher who addressed the topic, Gilles Deleuze,

    takes a different view, seeing simulacra as the avenue by which accepted ideals or ―privileged

    position‖ could be ―challenged and overturned.‖ Deleuze defines simulacra as "those systems in which different relates to different by means of difference itself. What is essential is that we find in

    these systems no prior identity, no internal resemblance." (Source:

    http://en.wikipedia.org/wiki/Simulacrum downloaded on 30/10/2009)

     7 The first order of Simulacra is denoted by counterfeit what he calls ‗natural law of value‘, the second order is labelled as that of production what he calls ‗commercial law of value‘ and the third order is labelled as that of simulation itself what he calls ‗structural law of value‘. At this third level he sees

    that the real is hyperreal it is only the simulated real (See Butler 1999 for a review of Jean Baudrillard‘s such works).

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    Disneyland is there to conceal the fact that it is the ―real‖ country, all of

    ―real‖ America, which is Disneyland… (It) is presented as imaginary in

    order to make us believe that the rest is real… but of the order of the

    hyperreal and of simulation. It is no longer a question of a false

    representation of reality (ideology), but of concealing the fact that the real is

    no longer real, and thus of saving the reality principle. (p 25)

    Baudrillard (1983) further alerts that:

    Of the same order as the impossibility of rediscovering an absolute level of

    the real, is the impossibility of staging an illusion. Illusion is no longer

    possible, because the real is no longer possible. (p 38)

    … In this impossibility of isolating the process of simulation must be seen

    the whole thrust of an order that can only see and understand in terms of

    some reality, because it can function somewhere else…that no equivalence

    with the real is possible… the challenge of simulation is irreceivable by

    power. (p 40)

    Hyperreality and simulation are deterrents of every principle and of every

    objective; they turn against power this deterrence which is so well utilised

    for a long time itself. (p 43)

    Although, Baurdrillard‘s (1983, p 40) rather extreme statement that no equivalence

    with the real is possible‖ may not be accurate for all aspects of our accounting

    practices, including the measurement of all of the ALORE (assets, liabilities, owner equity, revenues and expenses) items at least, it can provide us with a reason for socially constructing and sensitising the missing elements of the accounting equation for a just and better representation of financial reporting.

    Massumi (1987) revisited the works of Jean Baudrillard, Gilles Deleuze and Félix Guattari on the concept of Simulacrum in an article entitled: Realer than real: The simulacrum according to Deluze and Guattari. Massumi also argues that Deleuze and Guattari have opened up the issue of representation with a moderately positive attitude compared to Buadrillard who has extreme views on the substitution of signs

    of the real for the real which no longer bear a relation to any reality whatsoever. According to Deluze and Guatarri, it appears that ―the resemblance of the simulacrum is a means, not an end‖ (Massumi, 1987, p2). He further argues that, albeit, as the

    world is a complex circuit of interconnected simulations; we need to consider not only how the model and the copy or the real and the imaginary may differ but also between

    the modes of simulations among various layers. For example, at the standard setting level the signs are at the surface level seen to be normative rules. With empathy we see, similar to Massumi (1987), that: ―The original formula... was apparently flawed. They did the best they could do, but only reached obsolescene‖. (p5) But at the level

    of application (entity level) they may not resemblance the model xxx Massumi (1987) argues that

    The work of Baudrillard is one long lament. Both linear and dialectical causality no longer function, therefore everything is indetermination. .. Images are no longer anchored by representation, therefore they float weightless in hyperspace... A circuit has been created between the real and the imaginary, therefore reality has imploded into the undecidable proximity of hyperreality. All of these statements make sense only if it is assumed that only conceivable alternative to representative order is absolute indetermination, whereas idetermination as he

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    speaks of it is in fact only flipside of order, as necessary to it as the fake copy is to the model, and every bit as much a part of its system. (pp 6-7)

    Baudrillard (1983) also alerts that: The very definition of the real becomes: that

    of which it is possible to give an equivalent reproduction…the real is not only

    what can be reproduced, but that which is always already reproduced. ..that is,

    the hyperreal… which is entirely in simulation. (p146)

    Similar to Jean Baurillard, we believe, some of the ALORE (if not all) items may have the characteristics of the hyperreal (economic or other realities) which can only be apprehended through social construction and in simulation. For example, the fair value determination at the third tiers (Hitz 2007) for many organisations may have similar characteristics (see Bougen and Young 2011).

    In addition to the metaphors of sign-to-referent our considered third term is ‗alleged

    or imaginary. This is used based on the exiting literature (cf. Ijiri 1886, 1989; Ijiri and Neol 1984, Mattessich 2003 and Ravenscroft and Williams 2009). At the meta-level works, including studies in accounting and finance using Positive Social Science (PSS) (cf., Beaver 2002, Jensen and Meckling 1976, Watts and Zimmerman 1978; 8, and Sutton 1988, Lev 2001, Aboody and Lev 2000, Lev and Sougiannis 1996Schipper 1989, Beaver et al 1979 and others); a great deal of research using Interpretive Social Science (ISS) and Critical Social Science (CSS) and even Post-Modern Social Sciences (PMSS) can be included on this layer. For example, Lev (2001) argued that ―there is often a large difference between the capitalised value of

    an entity and the net assets reported by that entity‖. Even with the adoption of AASB 138, there is strictness of the rules relating to the recognition of internally generated intangibles. All these examples for search for information contents can be considered as missing elements to determine the wealth at the referent level.

To reiterate, the assumption on the selection of any layer other than the sign layer will

    be value laden. The selection of any layer is however centered on value based epistemological choices and ontological beliefs about reality. In any case, the thrust for this alleged or imaginary layer is to improve the practice and unveil the gaps from the sign layer of objective derivation of information through financial reporting using extant standards and regulations. That is, similar to Massumi (1987), the signs could be considered as a means rather than an end in itself. The creation of such a layer is dependent on the paradigms that are in existence in our discipline of accounting including mainstream/positive, interpretive, critical or even postmodern social science (Neuman 2011, Chua 1986) researches in the financial reporting arena. In this regard, it should be mentioned that although McIntosh et al (2000) cast doubt over the studies employing information economics (as if they were referring to the work of capital market research or positive accounting research), we argue, such studies are inevitable to create an imaginary or alleged level in identifying the gaps although we are not claiming that, as far as the information provision for decision usefulness or otherwise is concerned, these are objective exercises. Rather, these exercises or investigations for information gaps or contents are subjective in identifying the missing elements (whether it is for measurement or accountability gaps).

8 For example, Lev (2001) argued that ―there is often large difference between the capitalised value of

    an entity and the net assets reported by that entity‖. Even with the adoption of AASB 138, there is strictness of the rules relating to the recognition of internally generated intangibles..

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