What if the very foundation of accounting is broken?
In my latest Earmark Podcast episode, I explore this thought-provoking question with Tom Selling, an expert on SEC compliance, GAAP, IFRS, and more.
Tom argues that historical cost accounting creates a "truth in labeling problem" that enables management to manipulate the system while overlooking economic reality.
We explore examples across industries:
How oil companies create 80% of their value when they discover reserves, but GAAP doesn't recognize a penny until decades later
Why pharmaceutical companies' most valuable assets - their drug discoveries - barely show up on balance sheets
How subscription businesses like Netflix know exactly what each customer is worth, but accounting treats customer acquisition as a pure expense
Perhaps the most eye-opening part is Tom's explanation of how a tiny $2 change in expected cash flows can lead to a $400,000 impairment loss, and why our current system basically lets management 'grade their own papers.'
This conversation will challenge everything you believe about what accounting should measure and presents a compelling vision for reform centered on balance sheets rather than earnings manipulation.
Listen here (and earn free CPE): https://podcast.earmarkcpe.com/93
