Eiko Arata: A Warning Against "Single-Set" Specifications

June 15, 2021

My field of expertise is financial accounting, which is one of the mechanisms for resolving information asymmetry in securities markets. Accounting is often called the "language of business," and at one time, it was touted alongside IT and English as one of the business world's "three sacred treasures." Whether or not these are truly "sacred treasures," all three share the commonality of being means of communication, and because the exchange of information has become internationalized, they have had to be standardized.

To communicate across borders—whether they be countries, companies, villages, or any other collective—it is necessary to standardize the means of communication. The most obvious example is English, a natural language that currently functions as the global standard. Regarding IT, to use a familiar example, a document created in Word can be exchanged across borders and still be opened and operated on a local computer.

What about accounting? Accounting information, the language used to communicate a company's performance to external stakeholders, is generated by applying rules called "accounting standards" to a tool called "double-entry bookkeeping." While the system of double-entry bookkeeping itself has been a standardized tool worldwide for a long time, its operational rules originally developed as social norms based on the business customs of specific countries and regions. However, with the internationalization of securities markets, the trend over the last 40 years has been that operational rules must be standardized to make accounting information comparable worldwide. Consequently, the International Accounting Standards Board (IASB) has been struggling with the goal of establishing a "single set" of accounting standards to be used globally, but it is difficult to say that they have been successful.

Imagine if we could only use English to express ourselves. Furthermore, these days, tools like Microsoft Office and LINE are often used as defaults—and in ways where nothing else is permitted—but what would happen if those systems were to collapse for some reason?

We can learn a great deal by drawing analogies to natural language and IT regarding the drawbacks of using a "single-set" means of communication. Being aware of the disadvantages of single-set specifications is not limited to accounting; it could also provide clues for solving numerous problems in fields such as education and management, including entrance exams and organizational performance evaluations.