When company managers, analysts and other “users” look at the numbers in a financial report, many claim not to recognize the company the report is supposed to represent. For them the changes introduced by the implementation of International Financial Reporting Standards (IFRS) in 2005 are not merely technical, but epistemological. Accounting used to be a mirror of “economic reality”. Admittedly it was an imprecise mirror, continuously debated and refined by accounting scholars and standard-setters, but a mirror nonetheless. The theoretical description of this worldview was the correspondence theory of truth. Given the constant fine-tuning of the mirror, change within this paradigm was normal, as better correspondence between financial reports and the reality they reported on was constantly sought. With the introduction of IFRS however, the changes burst its paradigmatic borders and ushered in a number of pivotal changes, such as more judgement, a shift from objective verifiability to intersubjectivity as the criterion for reliability, and a shift from historical cost valuation of assets, to market (or market aspiring) valuations of some assets. Arguably, accounting is no longer adapting to the mirror metaphor. The mirror has cracked.
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