1. The Pathways Commission
Vision for the First Academic
Exposure to Accounting

2. Contributors to the Pathways Vision Model:
Ellen Glazerman, EY
Leslie Knowlton, Deloitte
Lisa Koonce, University of Texas
Sam Leno, formerly Boston Scientific
David Moss, Citigroup - Citi Markets
Dan Roam, Digital Roam, Inc.
Julie Smith David, American Accounting Association
Tracey Sutherland, American Accounting Association
Mike Tiller, Indiana University, Chair of Vision Committee
Carolyn Wilson, Boston College
Pete Wilson, Boston College
Also received input from CFO’s affiliated with Intel, FedEx, & Whirlpool.

3. The “First Academic Exposure” is a student’s first introduction to accounting.
This may occur in:
High School
Community College
4-year College
Graduate School
Executive Education
Depth and breadth of content vary with course objectives and student context.
Explain that the model is:
-intended to bring to life, in a visual way, what it is that accountants really do, and are capable of doing, in today's world
-aimed at an audience who are about to have their first brush with accounting
-meant for deployment at any educational level
-best appreciated, by this audience, by remembering to view the model as if this were their very first brush with accounting too!

4. A widely held perception of accounting is that it’s the process of “bean counting.”
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5. Through this view, the public perceives accounting as a mechanical, black-or-white, right-or-wrong process.
This is the public’s perception:
Accountants “crunch the numbers” using mechanical, black & white rules that result in black and white accounting reports.
Importantly, the key take-away from this image is that this limited perception has consequences to our students and to us as educators.
Consequences to our students:
Students self-select into a career in accounting with this limited perception and constrains how they learn accounting (memorize vs. connect to the business activity). This also constrains how they look at their jobs as accountants. It can take years for them to see the broader opportunities of how they can contribute.
Students also self-select out of accounting as a consequence of this limited perception and don’t see or respect the bigger challenges and rewards of a career in accounting.
Importantly, the majority of students in the introductory course don’t become accountants. This limited perception can have even greater consequences as they don’t fully appreciate that accounting information is not ‘black or white’ nor appreciate how to use accounting information to make better decisions in their jobs or as citizens that influence public policy.
Limited perception has consequences to ourselves as educators:
It can constrain our curriculum to focus on the mechanical aspects of accounting. Like all stereo types, there’s an element of truth: some of accounting is “black and white”; but this is part of a much bigger picture.
Or, this can provide us a unique opportunity to change the public’s perception to a broader picture.
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6. Reality is that accounting plays a critical role in supporting a prosperous society.
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7. This is the “Pathways Vision Model.”
I’m going to start by previewing three overarching features of the model:
First, its elements are interdependent, second, its simple, yet deep, and third, its very inclusive.
The arrows connecting the elements illustrate their interdependencies and, in particular, how they affect and are affected by each other. There is a circular flow of cause and effect, starting with economic activity affecting accounting judgments, which affect the usefulness of information, which affect users’ decisions, which have consequences back on economic activity. This is the way most of us were taught accounting. But, this interdependence means all of the arrows can be reversed: Everything affects everything. As drawn, the model emphasizes the supply of information from preparers to users. Reversing the arrows emphasizes the demand for information, starting at the top with users seeking information about economic activity to facilitate decisions. This demand and supply feature is one of many concepts from information economics that are lurking in the background and give the model a sturdy conceptual foundation.
This is one of the ways the model’s simplicity masks its depth, but this doesn’t mean this depth is appropriate for an introductory course. Rather, the elements and their interdependencies can be introduced at the big-picture level in introductory courses and increasingly penetrated deeper and deeper in more advanced courses, including on-the-job training courses.
The model is inclusive in two ways: First, the scope of the economic activity and related decisions ranges from small entities such as project development teams or individual contributors to companies, not-for profits and governments. Second, it applies to all of the areas we teach, including financial, managerial, tax, auditing, systems, and not-for-profit accounting.
The model’s depth and inclusiveness accommodate a broad range of perspectives reflective of our diverse experiences.
Sam Leno interprets the model through the lens of a corporate executive with a particular appreciation for the benefits an accounting mindset has for problem solving, strategic planning, and financial reporting. Similarly, David Moss interprets the model through the lens of a sophisticated user; Leslie Knowlton and Ellen Glazerman through the lens of public accounting; Julie Smith David through the lens of systems experts; Lisa Koonze through the lens of behavioral research; Dan Roam through the lens of entrepreneurs; Mike Tiller through the tax lens; and Carolyn and I through the lens of information economics. In this regard, the model embraces many accounting pathways.
This work is by The Pathways Commission and is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.

8. Accounting is the language of business.
Often it is said that …
Accounting is the language of business.
Several years ago, a former MBA student, who had an undergraduate degree in English and spoke several languages, best described the model’s interdependencies at the end of an introductory financial course. I’m going to connect what he said that day to the model in the next three slides.
He started by saying, “Its often said that accounting is the language of business.”
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9. However, the public’s perception is narrow.
The public’s view of recording and reporting numbers and following “black and white” rules, while essential, is only the grammar.
“However, the public’s perception of accounting, is narrow…
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10. Rather…
A subtle aspect of accounting, like nuances in other languages, is that it both affects and is affected by the business reality and culture.
“Rather, A subtle aspect of accounting, like nuances in other languages, is that it both affects and is affected by the business reality and culture.”
This work is by The Pathways Commission and is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.

11. Critical Thinking Among other things, critical thinking includes:
Solving complex problems.
Developing creative solutions.
Identifying problems.
Gathering, analyzing, synthesizing, evaluating and credibly communicating information.
Identifying and counteracting bias, deception, and distortion.
Being skeptical, but not cynical.
The model emphasizes critical thinking by all decision makers, including business decisions related to the underlying economic activity, accounting judgments, users’ assessments of the usefulness of reported information, and users’ decisions.
Because of the model’s interdependencies, each of these decision makers must know how to think critically about the others’ decisions and environment. For example, accountants must understand how to think critically about the underlying economic activity and users’ decisions. Similarly, marketing managers must understand accounting.
This work is by The Pathways Commission and is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.

12. Economic Activity
The scope of economic activity embraced by the model has two dimensions: breadth and depth. As indicated earlier, the breadth of economic activity can range from small entities such as product development teams to entire companies or governments.
Similarly, the depth of one’s understanding of economic activity can range from describing the events and circumstances needed to record entries – who got what from whom – to a more profound understanding of the economic contexts needed to make informed accounting judgments, which includes:
Appreciating the roles played by the many entities engaged in business.
Recognizing the roles of accounting in strategic and tactical planning, coordinating, controlling and evaluating activities within and across entities.
Analyzing how economic activities are affected by the related business context, including resources, risks, laws, regulations, policies, incentives and other relevant factors.
This work is by The Pathways Commission and is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.

13. Accounting Judgments
Understanding accounting and how it relates to the underlying economic activity and users’ decisions helps preparers and users of information distinguish subjective “shades of gray”:
Recognize situations when experts agree there is one “correct accounting answer” – the business context and related accounting rules leave no leeway, so the answer is “black or white”.
Appreciate that at other times, experts can reasonably disagree on an accounting decision – the business context and related accounting rules require judgment.
Understanding accounting judgments and how they relate to the underlying economic activity and users’ decisions also helps interpret financial reports.
For example, knowing the accounting policies, procedures, and judgments behind reported information helps us connect it to the underlying economic activity.
This work is by The Pathways Commission and is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.

14. Useful Information
Understanding accounting and how it relates to the underlying economic activity and users’ decisions helps preparers and users assess the usefulness of information:
Financial or non-financial information is useful to the extent it’s relevant to decisions, comparable across entities and time, and faithfully represents the underlying economic activities.
Importantly, information can embody “shades of gray” depending on the business context and related accounting rules, yet still be very useful.
For users, these assessments start with a willingness and capacity to be skeptical and end with an assessment of the level of confidence that should be attributed to information and thus the influence it should have on their decisions.
For preparers, these assessments require an understanding of users’ skepticism and lead to strategies to mitigate this skepticism and thus increase the credibility of the reported information.
This work is by The Pathways Commission and is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.

15. Good Decisions
Understanding accounting and how it relates to the underlying economic activity and user decisions helps preparers and users make more informed decisions:
Facilitates better insider decisions, including planning, coordinating, controlling, reporting and evaluating economic activities.
Facilitates better outsider decisions, including investors and others assessing past performance and predicting future performance and auditors, regulators, and tax authorities assessing compliance.
This work is by The Pathways Commission and is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.

16. Consequences of User Decisions
Understanding accounting, the underlying economic activity and related user decisions helps preparers and users understand the anticipated consequences of user decisions:
Insiders are often rewarded for achieving targets based on reported numbers. For example, sales and marketing staff are frequently rewarded for meeting sales targets and division managers for meeting earnings or cash flow targets. Here the users’ decisions are internal performance reviews. Insiders also receive share-based compensation. In this case, they benefit from stock price increases associated investors’ decisions that are influenced by reported measures.
Anticipating these positive consequences of users’ decisions gives insiders incentives to work more efficiently and effectively. Thus, economic activity in the reporting entity is enhanced by the anticipation of rewards that will be influenced by measures of this activity.
The positive consequences of users’ decisions are not limited to the economic activity of the reporting entity. There are also positive social consequences associated with the efficient allocation of capital and the ripple effects of wealth generation.
In addition to affecting economic activity, the anticipated consequences of users’ decisions, including the decisions of auditors, regulators, and tax authorities, can affect accounting judgments that permit leeway for better or worse. To ensure they are rewarded for their performance, insiders have incentives to report ethically when they meet internal targets or shareholders’ expectations. However, they also have an incentive to misrepresent their performance when they fall short of their targets.
The consequences of users’ decisions closes the loop, which means each of the elements in the model affects and is affected by the other elements. This means accountants need to have a solid understanding of the underlying economic activity and users’ decisions and their consequences for the reporting entity and other stakeholders. But it also means others in the organization need to understand accounting judgments.
This work is by The Pathways Commission and is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.

17. Prosperous Society
Accountants have a responsibility to serve the public by striving to enhance all elements of the Pathways Vision Model and thus promote economic activity that leads to a more prosperous society.
In this regard, they do two things that benefit society. First, accountants create metrics that are essential for capitalism: incentives based on, or influenced by, accounting metrics motivate wealth generation: Incentives are the engine of capitalism and accounting measures are the fuel for this engine.
However, unbridled incentives can result in greed, wherein everyone pursues their self interests when they conflict with the public interest. Too much competition and not enough cooperation. This leads to the second way accountants benefit society: They provide controls to curb socially undesirable behavior associated with the unintended consequences of incentives, namely greed.
To summarize, accounting is the language of business that facilitates a healthy tension between the competitive forces associated with capitalism and the cooperative forces associated with society. The result is a more prosperous society.
This work is by The Pathways Commission and is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.

18. As educators, our goal is to shift the perception toward the reality.
Education
The first course
has the broadest
impact.
In order to play our societal role as best we can, we need to be sure that our students get the most complete picture of how the world works. Etc.
This work is by The Pathways Commission and is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.

19. Lastly, this accommodates diverse educational missions
All of the elements of the model can be emphasized at various levels based on each school’s students and mission.
We recommend the first course cover at least a general awareness of all of the elements and the ways they are connected.
Close with questions for all of us who are educators:
What will you do when you meet your classes for the first time in a couple of weeks?
What might our accounting classes look like if each major topic in the course were framed in terms of the elements discussed today?
Where can we get the Pathways Vision Model?
What will happen next as the Pathways Commission moves forward?
This work is by The Pathways Commission and is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.

20. The Pathways Commission
THOUGHTS?
Thoughts?
Thank you all for this interesting slice of life!!
The Pathways Commission