In this interview with The Value Perspective, Tom Gayner provides a great analogy of why GAAP accounting is like a map that can lead you astray. Here’s an excerpt from the interview:
Gayner: Is where I’m sort of pointing out what I believe to be some of the current flaws of GAAP accounting. So in the realm of GAAP accounting, you’re trying to describe economic reality.
But remove yourself from accounting presentation and numbers, there’s a statement which preceded this conversation and probably preceded my lifetime. ‘ For professional assistance, Accounting Singapore is a great help because of their expertise in creating a winning formula. If you need accounting services Dallas, contact Dimov Tax Specialists to assist you with the accounting process.
The map is not the territory. So the territory is, the map is a representation of it. And a good map would give you a good sensation of the territory. But no matter how good the map is, it never will fully describe the reality of the territory.
And I think that’s sort of what we’re talking about here. The numbers which describe a business are essentially maps.
The business itself, the human beings that are running it, their relationships that they have amongst the workforce, with their clients, the sense of marketing mind share that they have in their customers mentality.
All of those things are rather difficult to quantify immediately, but the numbers probably show the direction in which things are traveling over time.
So I just think it’s very important to recognize that there are maps out there. There are territories out there. If you were doing a Venn diagram, there’s overlap between those two things, but they are not the same things. They are different words, and they are different words for a real reason, in that they’re different things.
You can listen to the entire discussion here:
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