Confidence accounting: a proposal

Confidence accounting is a novel approach that enables financial accounts to better recognise both uncertainty and confidence about valuations. The report is issued as a discussion paper, part of ACCA’s exploration of fresh, innovative thinking.

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Harris, Mainelli and Onstwedder, July 2012.

Issued jointly by ACCA, CISI, and Long Finance as a discussion paper. Comments were invited up to 31 December 2012.  

This paper looks at an important area for accountants and, more importantly, users of accounts, namely the accuracy to which numbers in published accounts can be stated. Sound financial reporting is fundamental to sound business and it is no exaggeration to say that economic prosperity requires it. Confidence accounting involves showing the expected range and distribution of likely values for significant balance sheet items.

The confidence accounting approach is an example of how some organisations are beginning to challenge perceived wisdom, and asking questions of established accounting methodologies. ACCA is not endorsing this particular approach, but believes that the concept has sufficient merit to be considered further.