The End of Accounting and the Path Forward for Investors and Managers

Chapter 1Corporate Reporting Then and Now: A Century of “Progress”

In which we show, using US Steel’s financial reports from 1902 (yes, 1902) and 2012, that the structure and content of corporate financial reports—balance sheets, income and cash flow statements—haven’t changed over the past 110 years, despite dramatic increases in investors’ sophistication, information processing ability, and complexity of business operation. Surprised? We don’t blame you.

Spot the Differences

The year is 1903. Theodore Roosevelt is in his third year of presidency, the Ford Motor Co. produces its first car—the Model A (available, as Henry Ford said, in any color as long as it's black)—and the first World Series is played: Boston Americans (soon the Boston Red Sox) versus the Pittsburgh Pirates. No surprise, Boston wins with Cy Young pitching. Alas, there is no television to watch the game, nor is there air transportation, or shopping malls. Not even the Internet—no Facebook or Twitter. But steel is produced, and the largest steel producer in the world—United States Steel Corporation (US Steel)—publishes its first annual report to shareholders. The main components of this report, the balance sheet and the income (profit or loss) statement for the previous year, 1902, are recast below, alongside with—fast-forward 110 years—their 2012 counterparts. (The original 1902 US Steel statements are reproduced in the Appendix.)

Recall your early childhood when you likely played the popular game Spot ...