Accounting History: The Age of Excess

Posted by accountingweb on Apr 10 2011 1030 printer friendly

"Class, the question was: What was the accounting change in the early 21st century that ended the so called Age of Excess? The computer has normalized your answers. Computer?"

Computer - The answers:

To recognize the cost of resource depletion as an expense. 64%
To stop treating the planet as being a limitless source of energy. 22%
To add the societal costs of living as a social tax to corporate and personal expenditures. 13%
To stop the stupidity. 1%

"Excellent, class. Bryyan, please stop hacking meGGan's console. Perhaps you would like to tell the class in your own words, how you would explain to a non-accountant from the late 20th century what the problem was?"

"Umm . . . ah . . . It was just stupid what they were doing."

"Hmm, Bryyan. I think you will need to sharpen your communication skills. Anyone else? . . . Alycya?"

"I would say, 'If you think of the world as your house and you were selling it off brick by brick, it's a mistake to think of those sales as revenue. In reality, you are spending your capital.'"

"Good, Alycya. So, would you recognize a gain or a loss on that sale? Let's let someone else input their answer. Jorgan?"

"Like Alycya said, it's obviously a loss."

"Wait a second, Jorgan. The concept of the Global Resource Depletion Expense or GReDE, was not created until 2020. In the accounting of those days, it would be a profit and a big one at that."

"That sucks. No wonder they pulled as much out of the ground as they could!"

"Right again, Jorgan. But think for a moment. Why was that a bad thing? OK Alycya, you don't have to keep pushing the facilitator button. I know you're keen. Go ahead."

"Their technology was ancient. We can extract a lot more energy from the same resources now than they could then."

"OK Alycya, but can you give me proof that a late 20th century accountant would accept? . . . No? . . . Anyone? . . . Maxx, you're a 20th century technology fan. Anything to add?"

"Well, if you look at cars from the 1950's compared to cars in the 2000's, you can see that they got a lot more power out of a smaller amount of fuel."

"Excellent. OK class, when we meet tomorrow be prepared to discuss the GReDE calculations and how they were affected by IFRS. Class dismissed."