June 8, 2009
More on Fixing Performance Measurement
– Ridgway Barker, Kelley Drye & Warren
Following up on this blog, the real problem when dealing with performance metrics is the accounting system/GAAP; that is mostly what Fred Whittlesey wrote about. GAAP has left its original roots (i.e. cost accounting) – and is now being used as single comprehensive measure of a business. That goal mostly is a fantasy and so the “books” are largely fiction.
Financial statements should measure only things that can be accurately measured, like cash in and cash out, and other aspects of the disclosure system should address other less precise issues.