Sunder on Accounting Regulation
The point of accounting regulation is to provide for uniform and consistent financial reporting. While such an approach makes sense, Shyam Sunder, the James L. Frank Professor of Accounting, Economics, and Finance, argues that trying to objectively quantify the assets and liabilities of huge and dynamic corporations often leads to a host of unforeseen problems.
One challenge is how to assign present value to an asset that is illiquid or for which there is no current market. As Sunder explains, another major problem with attempting to strictly define corporate accounting is that once new rules are created, financial engineers rush to find ways to circumvent them. Sunder argues that some of the blame for the financial crisis can be assigned to this game, as he calls it, between regulators and financial engineers over how to measure the true bottom lines of companies.
Sunder is an experimental economist and accounting theorist. His research contributions include financial reporting, dissemination of information in security markets, statistical theory of valuation, and design of electronic markets. He has published five books and more than 150 articles in leading journals of accounting, economics, and finance.
Faculty Insights: Sunder on Accounting Regulation. (9:40)