Accounting, Communication, and the Pygmalion Syndrome.

This article explains the Pygmalion Syndrome and provides illustrations of where it is found in accounting and the types of problems caused by it. Accountants often reify income. They speak of distributing it, retaining it, re-investing it, ploughing it back, financing plant and equipment out of it, and so forth. Income is a conceptual model. Thus, if two accountants are discussing a client and one of them states that X Corp. distributed 40 percent of its income last year, the result is not necessarily poor or ineffective communication. Even though income has been reified, the sender and the receiver of the message may both interpret the words used in the same way. The problems created by reifying income are not limited to communicating with non-accountants. Often accountants themselves become so accustomed to viewing real-world events through the accounting model that they confuse the model with the events themselves. Even accounting standard setters do not seem to be immune from the Pygmalion Syndrome. It would seem that if capital surplus includes the effect on equity of all gains on treasury stock, it should include all losses as well, not just those that happen to have occurred at a time when the sum of previous gains exceeds the sum of previous losses. Another effect of the Pygmalion Syndrome is that it sometimes allows judgments about an accounting procedure to masquerade as arguments. Those who suffer from the Pygmalion Syndrome seem to believe that income can be distorted in some absolute sense. Perhaps some of the most serious consequences of the Pygmalion Syndrome have resulted from the blurring of the distinction between real-world enterprise assets such as inventory, equipment, and so forth, and the costs of those assets.