chapter  6
FASB and social reality: an alternate realist view
Pages 19

A discussion (and exchange of views) on accounting reality – particularly in reference to standard-setting activity of the Financial Accounting Standards Board (FASB) of the USA – can be found in Volume 6 (2006) of the e-journal of the American Accounting Association, Accounting and the Public Interest. The participating authors were Lee (2006a, 2006b), Macintosh (2006) and P.F. Williams (2006). The present chapter is based on a paper (Mattessich 2009) discussing and responding to this exchange of opinions. Lee (2009) in turn reacted to Mattessich (2009) which gives rise to a further analysis of Searle’s (1995) social ontology and its application in accounting – here reflected in Chapter 7. The first of the above-mentioned essays starts with reference to the Financial Accounting Standards Board’s (FASB 2002: 5) proposal to continue with its conceptual framework (CF ) by improving it in various directions, and basing its standards on a principle-based accounting standards (PBAS), instead of the traditional rule-based accounting standards. Lee (2006a) points at the past dissatisfaction with the American CF. He continues with an examination of FASB (2002) and notes that ‘the FASB proposal advocates accounting standards based on the notion of faithful representing a relevant economic reality [note omitted]’ (Lee 2006a: 2). But Lee doubts whether the FASB can succeed in such an endeavour unless it comes to grips with ‘the issue of socially constructed reality and its numerical representation’ as well as with the problems of (1) an economic (or social) reality independent of human minds, and (2) practical devices to measure the manifestations of this kind of reality. Lee then asserts that ‘social reality is subjective and dependent on human observation, consensus and communication for its existence’ (Lee 2006a: 3, my italics). This sentence appears to imply Searle’s (1995) theory – though before Lee had an opportunity to introduce its details and intricacies to the reader. Apart from that, this is a passage where many accountants might disagree or ask themselves: ‘If social reality is ontologically subjective, how come that we regard such verifiable things as properties rights, debt relations, acquisition costs, current market value, etc. as objective?’ Yet, in this section I am committed to offer a concise overview of those papers. So let me continue, with the intention to return to this central problem in a later section.1