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Williams, P. F. 1987. The legitimate concern with fairness. Accounting Organizations and Society 12(2): 169-189.

Summary by Rosalyn Mansour
Ph.D. Program in Accounting
University of South Florida, Spring 2004

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Problem: The commonly accepted notion that “accounting’s purpose is to provide information useful in making economic decisions” has been the guidepost for both accounting research and standards setting. According to the author, this concept of “decision usefulness” should not be directing accounting research or practice, because it does not both evaluate and explain accounting data. Furthermore, the final result of decision making is distribution of resources, which is an issue of fairness not adequately addressed by decision usefulness.

Defining Constructs: The following are definitions assumed by the paper.

Decision Usefulness – “Justification for those accounting products if they facilitate making choices that lead to the achievement of some goal.” It is focused on the end result.

Accountability – “obligatory relationship created via transactions in which one party is expected to give an account of its action to other parties (not necessarily parties involved in the transaction).” It is a constraint and is focused on the means of reaching the end result.

Fairness – “noun that describes an evaluation process with two interrelated attributes.” These attributes are: (1) Evaluator knows his/her actions will be judged fair/unfair and (2) Evaluator attempts an objective perspective.

Relationships Among Constructs: As defined above, the constructs of decision usefulness, accountability, and fairness are related as follows.

Decision usefulness facilitates while accountability constrains. Facilitating and constraining are opposing objectives; therefore, they will not lead to the same conclusion and should be considered separate and unrelated constructs.

Accountability relationships are mediated by fairness. The constraint issues associated with accountability cause conflict that is then resolved using some criteria of fairness.

The Asymmetry of Decision Usefulness

According to (Burchell et al., 1980), “accounting research has, generally, two objectives in which decision usefulness plays two potentially different roles,” which he says creates a problem of asymmetry. The two objectives of accounting are (1) Investigating the value of data and (2) developing accounting theories. In the first objective, the role of decision usefulness is as a “criterion for making a value judgment about the data” and the object of concern is data value. In the second objective, the role of decision usefulness is an explanation for the data it represents; therefore, its concern is on an explanation. The author says that for these two roles to be symmetric, they must be substitutable.

The argument that decision usefulness lacks symmetry. He says that lack of symmetry can be inferred by considering the implications of symmetry for some assumptions about the accounting environment. To understand, the reader has to systematically make a case built upon these assumptions. The following steps start with the basic assumptions and then provide a point-by-point explanation for his argument that decision usefulness lacks symmetry.

1. Accounting data is created by and about identifiable entities.

2. These entities are goal driven.

3. Decisions aren’t always independent as some decisions are based on the outcomes of others.

4. Management and the entity’s goals are congruent. Stakeholders base their actions on management’s actions and all parties are aware of each other.

5. Accounting data is both a decision input and evaluation about consequences of a decision.

6. Accounting data has the unusual characteristic of being a proxy for objects that are unobservable and the numbers are the only things observable. He says this transforms the accounting data, which is about an object, into the object itself.

7. Because accounting data represents an object and at the same time is the object, accounting data is not only an evaluation about the consequences, but it is the consequences themselves.

8. The choice of accounting data can be the choice of what outcome the decision maker wants and is unrestricted because he/she is the object of concern.

Modeling of decisions assumes that there are constraints on the production of accounting data and the choices of decision makers (users of accounting data don’t have unrestricted choice in selecting accounting operations); however, as shown in steps 1-8 above, decision usefulness does not provide for such constraints. It is accepted that accounting constrains whereas Williams has logically argued that the concept of decision usefulness results in no constraints. Since the two are incompatible, then they are asymmetric. Instead, he argues that accountability is compatible with constraint and it also inherently contains the concept of fairness.

Efficiency and Distribution

The following model shows two viewpoints about the result of decision usefulness.

Decision Model

Some say that optimal distribution of economic resources is not the focus of accounting and is distinctly separate from efficient allocation of resources (modeled by straight lines). They further insist that market forces will take care of equitable distribution, which is a societal goal. Williams posits that the two are inseparable (modeled by both straight and dotted lines) and that both efficiency and distribution require value judgments of fairness.

Market judgment of fairness

Adherents to decision usefulness base their position on their belief that the “free market” will ensure equitable distribution and that accounting just makes market forces more efficient. He explores the Libertarian and utilitarian interpretations of accounting’s emphasis on efficiency and concludes “from a decision usefulness perspective reliance on efficiency criteria and market justice serves only to make accounting’s fairness judgments implicit, not absent.” As such, accounting must not only consider efficiency, but also consider moral consequences.


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