Making imaginary worlds real: The case of expensing employee stock options

Accounting, Organizations and Society 34 (2009) 770–786

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Making imaginary worlds real: The case of expensing employee stock options
Sue Ravenscroft a,*, Paul F. Williams b,1 a b

Department of Accounting, Iowa State University, 2330 Gerdin Building, Ames, IA 50011-1350, United States
Department of Accounting, North Carolina State University, Box 8113, Raleigh, NC 27695-8113, United States

a b s t r a c t
West [West, B. (2003). Professionalism and accounting rules. London: Routledge] and Chambers [Chambers, R. J. (1966). Accounting evaluation and economic behavior. Houston: Scholars Book Company] have provocatively 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 US accounting academy into a sub-discipline of financial economics, a transformation in which accounting became a servant of the imaginary world of neoclassical economics. After noting the unusually prominent role of rules within the accounting profession, we describe the displacement of accounting’s centuries-old root metaphor of accountability by the metaphor of information usefulness, and situate that displacement within neoliberalism, a broader political movement that arose after World War II. Finally, we use SFAS 123R, the recently issued stock option standard, as a case study of the incoherence that West and Chambers assert. Through various issues – such as reflexivity, theory paradox, and unexplained questions of responsibility – we demonstrate the logical inconsistencies involved in SFAS 123F. The incoherence of stock option reporting rules raises serious questions about the information metaphor as a foundation for either individual rules or the standard setting process. The Financial Accounting Standards Board’s
(FASB) attempts to

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