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TOWARDS AMETA THEORY OFACCOUNTING FOR KNOWLEDGE MANAGEMENT: REVIEW THE
REALITIES TO STAGE THE CRITICAL THINKING OF KNOWLEDGE BUSINESS MODEL
SBE, Vol.20, No.1, 2017
ISSN 1818-1228
©Copyright 2017/College of Business and Economics,
Qatar University
the profit engine nor reporting priorities of
knowledge business model. Further, the equity
is no longer matching the requirements of the
accounting definition in terms of ownership
and effectiveness. Knowledge equity is not
only owned to shareholders, but to stakeholders
and based on customer’s and employee’s
equities. These seismic logical changes have
raised the critical questions about the validity
of accounting equation and the reporting
formats of financial statements. The critical
theory of accounting clearly declared those two
out of three components of the accounting
equation is no longer valid and effective to
reflect knowledge initiatives result. The critical
theorists of accounting argue that the terms of
assets definition have become inadequate and
no longer valid to match the realities of
knowledge management. It is inconceivable to
address knowledge performance by the
equation and financial statements of the
industrial management. According to those
theorists, the philosophical theory of accounting
does not drive the practices of knowledge
companies. The advocates of accounting
essentialism have judged by consequences the
validity of accounting against knowledge
management. Consequently, they assessed the
feasibility of creating knowledge financial
statements to replace the industrial set
(Amidon, 2003). The great emphasis of the
new set has been centered on knowledge assets
and value reporting to match assumptions and
necessities of knowledge management.
Applying the new models of business
technologies has been started since the mid of
nineties. As a result, assets of knowledge
financial statements come down and less
working capital is presented. A new set of
knowledge financial statements is mingling
knowledge, technology, and intellectual capital
as a matrix of business success. A key feature
of these statements is transformation of
working capital from being financial asset to
business liability. In knowledge financial
statements, business goal is zero or even
negative working capital (Keen and Balance,
1997). For example, in knowledge financial
statements, sales policies of companies aimed
at rapid collection of accounts receivables. The
result of such action is a balance sheet that
shows accounts receivables with period of
many days and accounts payable with time
period of months. The cash surplus means that
companies are probably not using adequate
business technologies of investment and
commerce. The large accounts receivable is an
indication of the inadequacy of electronic
payment, electronic data interchange,
networking, and other concerned systems.
However, large inventories, material and
manufacturing goods are evidences of poor
customer-supplier electronic links, and
ignorance of just-in-time tools. Using
information technology was not confined to
substitute information with inventory or zero
working capital. But using high speed data
communication networks to track production,
stock, and orders has replaced physical assets
by virtual assets. As a result for such
replacement, knowledge companies have been
reduced in terms of size. The problem of the
accounting model, is that accounting balance
sheet or tangible assets sheet has taken its
present format in 1868. Its format portraits the
old realities of accounting for industrial
management. The fundamental implication of
the balance sheet equation is that total assets of
business have to be equal to both liabilities and
equities. The architecture of this equation has
been tailored to match the management of
accounting assets. More specifically, in terms
of working capital (receivables and inventory),
and non-current assets (machines and stores).
Use of knowledge assets has changed the rules
of the game and priorities of companies. As
hard assets is no longer considered profit
engine of knowledge business model. Further,