Let’s play another round of “Great Cliches of IFRS” –

• Often called “the language of business,” finance and accounting information is the foundation for all business decisions. While it might not seem to be important in the early stages of your career, the importance of finance and accounting becomes amplified as you ascend the corporate ladder. As a senior leader, you must provide financial justification for the decisions you make, and you must make those decisions based on numbers that come from other people. If you don’t know what the numbers mean, and you don’t know the right questions to ask, your effectiveness as a leader is minimized.
• Finance and accounting aren’t sexy topics. But as the language of business, you have to learn to speak it.

Well, that’s probably enough already. The familiar “language of business” phrase is often attributed to Warren Buffet; a recent LinkedIn post by Accent Financial Services cited him in this regard and then expanded: “In business, there are three main “languages” – #accounting, #finance, and #economics. In order to support decision-making under uncertainty, the languages of accounting (historical information), finance (forward-looking information), and economics (external forces) all help managers make better decisions.” I’m not sure what that bulletin was intended to achieve, but anyway, a rebuttal led me to an interesting blog that I hadn’t come across before, “Accounting Miscellany,” written by Peter Clark. Here are some extracts from that particular post, “Accounting is Not a Language.”

• It has become a cliché to say that accounting is the language of business. That metaphor is helpful because it emphasizes that accounting conveys vital information about business. But the metaphor can be unhelpful because, although accounting is a system for conveying information, accounting lacks most features of real human languages.

• Unlike human language, the vocabulary of accounting contains only nouns (names). It has no words of its own for, for example, verbs, adjectives, adverbs, prepositions, conjunctions or interjections—though occasionally some nouns in the accounting vocabulary include components drawn from the vocabulary of a human language…

• Real human language has syntax that assembles words into phrases, clauses and sentences. Syntax is, arguably, what distinguishes human language from all other forms of communication.

• Accounting involves no syntax…

• …accounting cannot be used for the many other functions served by human language, such as making a broader range of statements, asking questions, negating statements explicitly, issuing directions, expressing feelings, creating fiction, making jokes and playing games. 

It follows in the conclusion that “When companies need to convey information going beyond the limited (but important) information that accounting can convey, they need to use a real human language, for example by giving further explanation in the notes or in management commentary.” So there you are, case closed, no question. But that doesn’t necessarily demonstrate the initial premise, of why the metaphor with language is unhelpful. I mean, it’s not as if carelessly labeling accounting as a language could lead to it being misapplied in some key respect. Even if Buffet’s description of accounting as the language of business wasn’t wrong, it would be essentially meaningless – no one could have a business-related conversation (literally or metaphorically) solely through the medium of accounting. So why spend even a moment defending, or at least excusing, the characterization?

Well, maybe just in the name of boosterism. We’ve looked in a few recent posts at the profession’s current recruiting and motivational problems, and I said a while back that sometimes I think the very term “accountant,” with its outdated connotations, has become a burden, and should be replaced with “enterprise reporting specialist,” or suchlike. Descriptions of accounting as the language of business are perhaps based in a similar train of thought, to convey (however imprecisely) that accounting isn’t merely a narrow, computationally-oriented discipline, but a broad, multi-faceted one, inherently intertwined with strategy and risk management and all the other exciting stuff (including the work of the ISSB, recently referred to by its Chair Emmanuel Faber as “sustainability translated into an accounting language”). We can hope that the few occasions when the metaphor with language might be slightly unhelpful in leading people momentarily astray are comfortably outweighed by those in which it might lead people to think a little more about a function they might otherwise assume is merely to be left to the geeks.

All of that said, the aforementioned Peter Clark has thought through such issues much more than I have, and since April 2021 has even maintained another blog on “all things about language,” Language Miscellany. This is a good source of information you never realized you needed to know, such as a study into the sounds that most commonly make up swear words,  or another on how many nouns there are in Finnish. It’s 12,000 or fewer, only 29 of which are monosyllabic. And yet, they have twelve different terms for “hedging relationship”! (Actually I made that last thing up…)

The opinions expressed are solely those of the author.