Arbitrary and Incorrigible Allocations.

Abstract This article attempts to analyze the validity and significance of some conclusions on financial accounting allocation that are illustrated in two studies by economist Arthur L. Thomas. In the first, "The Allocation Problem in Financial Accounting Theory," published in 1969, he concluded that the allocations traditionally made in financial accounting are arbitrary and should cease. In the second, "The Allocation Problem Part Two," published in 1974, he concluded that financial accounting's allocations are not only arbitrary but also incorrigible and that they should cease. In the first study, Thomas concluded that financial accounting's allocations are arbitrary, with incorrigibility being distinguishable from and more important than arbitrariness. Considering the conclusion of the first study, the author argues that incorrigibility is the general underlying problem of which arbitrariness is one manifestation. It is noted that Thomas's conclusion regarding incorrigibility is founded on an implied starting point, that traditional accounting statements actually purport to make assertions about market-value numbers. The significant point, suggestively, is that Thomas is not justified in stating that allocations must cease because they are arbitrary. The proper conclusion for accounting is not to cease allocating, but either to cease allocating or to redefine accounting income in a manner that will allow effective algorithms which are uniquely objective-satisfying.