News Letter

Ahmed Ali Mohammad

SBE, Vol.20, No.1, 2017

ISSN 1818-1228

Qatar University

The transactional approach of accounting

measurement is based on highly restricted

physical terms to accept and record economic

events. The recording rules of business

transactions have been defined and practiced

according to the theory of visible logic. It has

become apparent that accounting measurement

is based on very flawed instruments in the

context of evaluation. Its historical, periodical,

cost and statements based measurement model

(Curtiss, 1999). These features interpret

why information provided by such model

irrelevant to match business necessities. A

critical distinction requires a greater awareness

of value in contrast to cost management.

Value management model is comprehensive,

forward-looking, real-time, value-based,

and actionable. The logical architecture of

accounting with its current theoretical ontology

has been established to report cost of business

(Lev, 2001). The basic critical point against

accounting logic is backward, transaction

based, tangible assets centered and articulated

to measure performance of high intensive

machines technology. These assets such as

physical capital, fixed assets, and inventory

(the assets of the industrial revolution) have

been considered driving engine of the industrial

revenues. In the dynamic theory of balance

sheet, these assets always appear at cost, which

is the production side rather than customer

side. As a result of such problems, the reported

profit of accounting has become less or more

than the generated or real profit. Further, the

market value of business organizations has

become more or doubles the accounting value

(Kortelainen

et al

., 2011).This situation raised

critical questions about the nature and lacks

that are specific to knowledge nature. Do

accountability as a key nature of accounting

under industrial era is no longer valid?

Does accounting information still relevant

under situation of knowledge management?

The significant interdependence between

accounting measurement and recognition has

duplicated its effect. These problems have

created the paradox of accounting capital

in front of business capital. For example,

how business capital evaluated in reality is

always more than the accounting capital in

the companies’ ledgers. In fact, the accounting

transactional rules recognize only vouchered

change in value. Tangible, visible, and

documented change in value will be recognized.

Accordingly, accounting has been defined

as a transaction-based evaluation model.

These recognition rules have always made

accounting transactions of assets, liabilities,

and equities to be reported in the balance sheet

at cost; which is the production side rather than

customer side. This situation has led a number

of business practitioners to inquire into the

accounting lacks that are specific to business

change. Two general explanations have been

formulated to summarize this era. The first

is that accounting and its recognition rules

has become inadequate when valuing unique

business assets. The second is that financial

statements are minimizing business value

because it has been designed to report static

assets on hold.

2.2.2

The second era of accounting studies

(1980s-1990s):

The decade of ninnies has been described as

“age of innovation”. Knowledge management

as an academic discipline clearly began after

unprecented development of information

technology and information systems for

business purposes. With the explosive

growth of business assets and organizations,

knowledge assets have become somewhat

synonymous to intangible assets in accounting.

Knowledge as a new economic phenomenon

has attracted the attention of business literature

and thinkers (Wiig, 1997; Haanes and

Lowendhal, 1997; Sveiby, 1997; Roos

et al