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Accounting for World War III

Our current accounting model is so flawed that it is used in a new fictional novel to trigger a global conflict. So, how might weaknesses in methods of valuation lead to the disaster told in ‘A silent War’

As members of the accounting community, we are aware of the shortcomings of the accounting model in measuring the true value within business. We have been aware of this problem for decades. We even know the problem is getting worse, yet what have we done about it?

Granted, it’s a big problem with no easy solution, but if we are to retain our role as accountants, then we are going to have to embrace this challenge. We can of course continue to let the problem slide, but then this isn’t good for business– or our reputations. There is, however, another aspect to this problem, which, until I read the novel ‘A Silent War’ by Adrian Dore, I had never thought of, or even considered; it represents a potential threat to our international economies. Perhaps the threat is nothing more than the author’s vivid imagination, but it certainly provokes thought and makes you see the problem in a new light. It makes you appreciate the need for change and how we cannot afford to allow the problem to continue to “slip”.

I would like to explain, in a simple and succinct manner, (without giving away too much of the story) how the author uses the accounting model’s ineffectiveness as a measurement standard as a “weapon” to destroy our western economies.

What struck me most was how plausible and easily implemented the antagonists plan is. It is this “plan” that I want to share with you.

Marketing is most affected by the accounting model’s inability to measure “value added”, as most of the tasks undertaken by marketing are about adding value that cannot be measured in strict financial accounting terms. Businesses spend money on marketing because they know it works, but do so reluctantly as “accountability” is poor. Is the marketing budget being wisely and optimally employed? We cannot answer these questions as we cannot measure their performance using our sole and universally accepted accounting model.

If we cannot measure, then the probability of funds being misappropriated, for whatever reason, are extremely high. This is the premise upon which the author bases part of his plot. A marketing association, which represents the global interests of national marketing associations around the world, is served papers by a British university claiming damages, on behalf of the business community, for marketing “being irrelevant and a squanderer of critical resources”. A court case ensues where clear and concise evidence is lead on both sides, with the finding that marketing is not “irrelevant”, but because of ineffective measurement standards, the probability of money being “squandered” is high and, as a result, a judgment is made against marketing.

This is where everybody, except the antagonist, thought it would end. He, however, knew that being armed with an important precedence, the likelihood of getting identical rulings around the world against national marketing associations would be high. Consequently, almost simultaneously, similar court actions are brought against all national marketing associations globally.

The reason behind this action is that legally, you can draw a direct relationship between a company and the association to which it belongs through its membership. So if there is no evidence that the company disagreed with the direction the association was taking, then by inference you can conclude the company supported the association’s direction. If the association is found guilty of being aware of practices that knowingly squander resources, and have done little to address the problem, then the company through its membership is equally guilty as they should have been equally aware of the problem. This then leaves the road open for individual shareholders to bring class actions against these companies for knowingly squandering shareholder funds. Such claims could amount to multiple millions per claim.

Members of these national marketing associations will, in all likelihood, comprise all major listed companies in their respective countries, so by going global on these court cases, the antagonist can implicate nearly every publicly listed company in the world as being a potential “squanderer of resources”.

Only one or two of these class actions need be brought anywhere in the world, and every major corporation knows it faces the same fate. This sets off a chain reaction on the global stock markets, where investors rush to divest funds in businesses likely to be affected. Problem is, every major corporation will be affected, so we see a crash in global markets like we’ve never seen before.

This all happens because our stock markets operate on the principles of fear and greed, not solid investment criteria. The antagonist has played stock traders at their own game, but on a much larger scale. Stock markets around the word shed trillions overnight – we face an international crisis like nothing ever before; all because we have done little, or nothing to address the inadequacies of our measurement methods.

There’s a lot more to this novel than just this, as it explains how our apparently benign business and social networks are nothing of the sort. How they have been “infiltrated” by organised crime offering “easy money and influence”, with the ability to debilitate governments. The story brings us to the brink of defeat in World War III without us knowing we are at war or who our enemy is.

Silent-war-book-coverA Silent War is published by Vanguard Press

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