Accounting as simulacrum and hyperreality: perspectives on income and capital

Le simulacre n'est jamais ce qui cache la verité C'est la verite qui cache qu'il n'y en pas...Le Simulacre est vrai (Baudrillard, 1981, p. 1) This paper draws on two independent strands of literature — Baudrillard's orders-of-simulacra theoretic and financial accounting theory — to investigate the ontological status of information in accounting reports. It draws on Baudrillard's concepts of simulacra, hyperreality and implosion to trace the historical transformations of the accounting signs of income and capital from Sumerian times to the present. It posits that accounting today no longer refers to any objective reality but instead circulates in a “hyperreality” of self-referential models. The paper then examines this conclusion from the viewpoint of recent clean surplus model research and argues that the distinction between income and capital is arbitrary and irrelevant provided the measurement process satisfies the clean surplus relation. Although accounting is arbitrary and hyperreal, it does impart a sense of exogeniety and predictability, particularly through the income calculation. Therefore, it can be relied on for decisions that do have real, material and social consequences. The paper ends with some implications of Baudrillard's theoretic for accounting, reflections on accounting's implications for Baudrillard's theoretic and suggestions for future research.