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Making Imaginary Worlds Real: The Case of Stock Option Expensing
Sue Ravenscroft, Iowa State University
Paul F. Williams, North Carolina State University
ABSTRACT. West (2003) and Chambers (1999) have argued that financial reporting has reached a state of near total incoherence. In this paper we argue that a source of this incoherence is the transformation of the U.S. accounting academy into a sub-discipline of financial economics, replacing accountability, the centuries-old root metaphor of accounting with the metaphor of information. Accounting thus became a servant of the imaginary world of neoclassical economics. We use SFAS 123R, the recently issued stock option standard as a case study of how the information metaphor, which is rooted in neoclassical economic ideology, contributes to the incoherence that West and Chambers assert. Through various issues - reflexivity, accountability, and theory paradox - we demonstrate the logical inconsistencies involved in expensing stock options. The rules create standards that are logically impossible to meet and thereby raise serious questions about the legitimacy of the entire standard setting process.
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