Taste Note - Amazon Accounting Best Sellers
The End of Accounting: Why Financial Reports Lost Their Grip on Value
A Kurums Book Taste review of The End of Accounting for professionals ready to hear the empirical case against their own reports - and what should replace them.
Why this book fits Kurums
Every other book on this shelf teaches you to use financial statements; Lev and Gu measure whether they are worth using - and find the association between reported earnings or book values and market values has eroded steadily since the 1950s, as intangible-driven business models outgrew an accounting system built for factories and inventory.
For the Kurums Accounting audience this is the essential self-critique: the argument that expensing R&D and brand-building as if they were rent destroys the balance sheet's meaning for modern companies, and the Strategic Resources & Consequences report they propose is a ready blueprint for the internal and investor reporting your stakeholders increasingly ask for anyway.
What the book argues
The empirical half documents the decline: across decades of market data, the authors show reported earnings and book values explaining an ever-smaller share of valuation differences, investors reacting less to earnings releases than to operational news, and analysts' calls dominated by questions the statements cannot answer - customer counts, pipelines, churn. The culprit is structural: accounting treats investments in intangibles - R&D, brands, software, organizational capital - as expenses, so the assets that generate most modern value never appear, while one-time items and estimate layers add noise to what does.
The diagnosis chapters sharpen it: for intangible-heavy companies, earnings systematically mis-state performance in both directions - understated while building (expensed investment) and overstated while harvesting (no amortization of the invisible assets being depleted). Case studies from pharma, media, and tech show statements for value-creating companies reading like decline, and vice versa, with the estimates problem (goodwill judgments, fair-value layers) compounding the drift between reported figures and economic events.
The constructive half is the Strategic Resources & Consequences report: disclose the strategic resources (patents, customer franchises, spectrum, brands), the investments that build them, their deployment, and the outcomes in value-driver terms - with worked versions for pharma (pipeline economics), media and telecom (subscriber acquisition, churn, lifetime value), and insurance. The authors' stance is reformist, not nihilist: keep the cash flow statement's integrity, but rebuild reporting around the resources that actually drive value - advice internal reporting teams can act on without waiting for standard-setters.
Key ideas, translated to your desk
Expensed investment is invisible value
R&D and brand spend are assets wearing expense costumes. Track them internally as investment with expected returns, whatever GAAP says.
Report the drivers, not just the results
Churn, pipeline, acquisition cost, lifetime value - the numbers analysts ask for first deserve first-class reporting discipline.
Earnings noise is structural
One-timers and estimate layers aren't anomalies; they're the system aging. Build your management view on cash and drivers, reconciled to GAAP rather than led by it.
Use it at work
- Build an internal Strategic Resources report for your company: resources, investment, deployment, outcomes.
- Reclassify intangible investment in management accounts and compute returns on it like any capex.
- Anchor board packs on value drivers with GAAP as reconciliation, not headline.
- Pair with Financial Shenanigans in training: one book on gaming the numbers, one on their decay - skepticism squared.
Read it if
- You run reporting for an intangible-heavy business and feel the statements missing the story.
- You design investor or board communication and want an evidence-based alternative frame.
- You enjoy your profession enough to read its strongest internal critique.
You can skip it if
- You need rules-compliant technique today; this is the argument about the rules.
- Your business is asset-heavy and statements still fit it well.
- Academic evidence chapters test your patience - skim to the SR&C blueprint.
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