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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
engine of generating business revenues has
been shifted from tangibles to intangibles
assets. Accordingly, accounting has long been
recognized as problematical for knowledge
management and its model is no longer
sufficient. The accounting model has been
invented over hundreds of years to measure
and report investment in tangible assets (Lev,
2001). The dilemma of accounting against
knowledge management is about theory to
practice. New knowledge practices are being
innovated every day, but new accounting
rules are not yet established and frame
worked (Mohammad, 2013b). Unfortunately,
accounting theorists and researchers have been
very slow to recognize this fact. Accounting by
its status qua is a fairly industrial intellectual
discipline and has yet to demonstrate the
maturity of knowledge management. The
accounting literatures reviewed with reference
to knowledge management clearly shown that
accountant’s community debate has focused on
three issues: lacks and critics associated with
the accounting model; nature of accounting
practices required to deal with knowledge
initiatives; and the rigid reporting format of
the financial statements. Accounting reporting
power against knowledge management is full
of controversy associated with necessities of
knowledge initiatives. The arguments have
centered on the reliability of accounting
information, gap of market value with book
value, knowledge income, future cash flows,
and logic of accounting equation (Lev and
Zarowin, 1999). These arguments are further
supported by the call to reform accounting rules
because of intangible assets. As such assets
are now the revenue engine of knowledge
management. The absence of those assets from
the financial statements leaves investors with
irrelevant information to make critical business
decisions. Lev, 2016 further claims that lack of
intangibles has probably led to the systematic
undervaluation of business assets. As a result,
insufficient investment in the core business
assets has been made. The lack of accounting
information for completeness and timeliness
on Knowledge assets contributes to what can
be titled “accounting asymmetry”. The basic
and most accepted truth is that the structural
components of accounting with its recording
philosophy and reporting mechanism have
been established to match the requirements
of the industrial management. The reality is
that such model has been invented to calculate
the cost of materials and wages. Thus, one
of key critics against accounting model is a
cost based and its calculations cope with the
industrial management not the knowledge
one. This reason in particular explains why
the current format of financial statements
does not disclose relevant and reliable
information about knowledge initiatives.
The nature of accounting theory especially
logic in terms of assumptions, principles,
and rules are primarily responsible for the
ultimate absent of knowledge information.
The problem of accounting against knowledge
management is the huge uncertainty which
produce volatility associated with risks and
due to such fact; investments in intangibles are
treated as expenses. In contrast, innovations in
knowledge management are created primarily
by investment in intangibles, when such
investments are commercially successed;
they are transformed into tangible assets
creating more corporate value and growth
(Lev, 2001). All these lacks incorporated in
the practical body of accounting model cited
accounting as inadequate for knowledge
management. Further, globalization, fast-
changing technologies, intensive investments
in human resources, high accelerated research
and development have doubled the crises
of accounting with knowledge management
and increased unreliability of accounting
information (Goldfinger, 1997). This paper
therefore goes beyond the extant literature