This is an excellent question posed by Valérie Charolles in a very fine essay that is both technical and philosophical. Disserting at the same time on public statistics, company accounts and Kantian philosophy, I will be forgiven for sticking to what concerns me, namely the accounts of economic operators.


Firstly, a comment on the figures: they are in fact of two kinds:

  • The financial data of economic entities are of an accounting nature: they are supposed to give an exhaustive account of a given situation according to the rules set, applied in a reasoned and prudent manner;
  • Statistical data, at least those based on surveys, make the assumption of exhaustiveness by neglecting the ‘tails of the distribution’, which are assumed to be insignificant and taken into account through the confidence factor, which no one ever looks at; on these points, the analysis of V. Charolles is particularly enlightening;

If I may make this comparison, between the two approaches, there is the difference between the current result and the net result. How many times have we heard company directors explain to us “if there had not been such and such an event…”?


V. Charolles explains in a few well-crafted pages that business plans are the result of the alliance between the calculator and the cigar. The manager, ontologically a cigar smoker, makes the calculator say what he wants. True and false, at least as long as we remain among people of good faith:

  • true because every major decision is political and its mere existence changes the previous situation;
  • This is true because the time factor is the most difficult to assess: since the nuclear programme has been in existence, the lifespan of power plants has increased; conversely, the Panama scandal and the Eurotunnel scandal are partly linked to an insufficient estimate of the return on investment;
  • true because the business plan is implicitly the average of a series of possibilities;
  • false because it remains mostly proof by the absurd; I remember, at the time of the 2000 bubble, seeing business plans that implicitly assumed that all 6 billion people would own at least 2 mobile phones by 2010. There is a limit to the elasticity of numbers!


Everyone knows since Henry Ford that the value of employees is not on the balance sheet. V. Charolles draws, in my opinion wrongly, the conclusion that this absence leads to wrong economic decisions. She assumes a (happy) entrepreneur who needs to increase his production potential to cope with a growth in demand: either he makes his current lines work 3×8 instead of 2×8, or he invests in a third fully automatic line. The discounted cost of both projects is identical. He will therefore make his choice based on factors such as

  • the consequences of a downturn in demand: what will be more difficult: laying off staff or negotiating with lenders?
  • the company’s accumulated know-how: is it better to invest in a new technology or stick to proven techniques?

The fact that one decision is an investment and the other is not seems to me to be quite secondary and financial analysts are not (all) foolish enough to systematically prefer a purchase that improves EBITDA to a hiring that decreases it. They also take into account the gearing of the business.


The criticism that accounting does not accurately represent intangible values is correct in theory, but has less application than one might think in practice because of the merger and acquisition movement. Most of the large IT or communication groups were built through acquisitions. Goodwill is therefore generated and it is regularly verified that it is justified. It can be considered today (CAC40<3000) that the consolidated net assets of a large group in the intangible economy are fairly representative of its real value.

Much more justified is his remark on the misinterpretation of a rise in raw materials, which should be seen for what it is, namely a pressure for more sustainable development. Current accounting does not measure the relationship between the company and nature because nature is not represented by anyone. The environmental reports published by the major groups do provide information, but in the absence of a complete and comprehensive system, it is not known what the balance of the company/nature exchange is.

What has just been said about natural resources also applies to a slightly different category, that of public goods, on which V. Charolles’ developments are very convincing. What is the value of the frequency spectrum owned by the state? On these fundamental subjects, let us look for the Luca Paccioli of the 21st century…


Let us finish with V. Charolles’ thinly veiled frustration at seeing the State or the European Commission abandon all prerogatives in accounting matters in favour of the IASB. This thesis is widely held in France, remembering the glorious accounting plan of our ancestors. I completely disagree with this thesis in that it echoes Clemenceau’s famous words on war, a subject too serious to be left in the hands of the military. Only the IASB is now capable of producing standards that are reasonably free from political pressure and globally accepted, which will be done by 2014 at the latest with the acceptance of international standards by the United States. This does not, of course, prevent :

  • to improve its governance, so that real life is taken into account in the development of its standards and not just the beauty of the theory;
  • to consider a partial disconnection between accounting rules and prudential rules, as the former do not have the same objective as the latter, in the same way that our tax rules deviate from accounting rules on a number of points.

As for the reproach that accounting renders accounts in the exclusive interest of the equity provider, this is a very old quarrel that will fizzle out as long as positive law makes it the last resort, capable of losing all its stake. The real issue is not the hierarchy of beneficiaries of financial information, but the approach taken: micro-economic for IFRS, macro-economic in our original Chart of Accounts.

As you can see, V. Charolles’ book, whose subtitle is “economic-philosophical chronicles”, is essential reading for anyone interested in figures!

Dominique LEDOUBLE

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