I May Be Wrong, But I Doubt It: How Accounting Information Undermines Profitability

Authored By: Douglas T. Hicks, PCS Consulting Alliance Partner

It may be effective in reporting historical results to outsiders, but relying on the information generated by a GAAP-based accounting system when making management decisions can seriously undermine a company’s ability to grow into a profitable future.  Doug Hicks, PCS Consulting Alliance Partner, makes the case to support this statement in his new book.

Included in the sixteen essays that comprise this book are arguments describing why:

  • Profit as a percentage of sales is an incomplete and misleading measure of product or service profitability.
  • Depreciation is not only totally irrelevant for decision makers, it can be one of the most damaging concepts in accounting.
  • Evaluating management performance using financial accounting turns managers into “game players” whose actions are directed at generating the best short-term scores at the expense of long-term success.
  • Popular solutions to today’s cost information problems (ABC/M, Lean Accounting, GPK, Resource-Driven Accounting, etc.) are so narrowly focused as to be irrelevant for a majority of decision makers.
  • The phrase “Management Accountant” might qualify as an oxymoron and true management accountants may be as rare a Boston Red Sox fan living in New York.
  • Traditional accounting has trouble distinguishing among a cost, an investment, and a profit.
  • The discipline of accounting is so focused on arbitrary rules and regulations that accountants may be incapable recognizing economic reality when they see it.
  • The best solution may be to relieve accountants of their duties as providers of decision support information and assign those duties to individuals whose thought processes have not been tainted with GAAP.
Does your company’s accounting information guide or misguide management?  Does it promote or undermine your company’s profitability?  Does it result in management making decisions based on fiction instead of on reality?  Find out how your company stacks up by reading I May Be Wrong, But I Doubt It: How Accounting Information Undermines Profitability.

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ISBN: 978-0-557-03159-7
Publisher: Lulu.com
Rights Owner: Douglas Hicks
Copyright: © 2008 D. T. Hicks & Co.
Language: English
 
 
 

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