Epistemological objectivity in financial reporting : Does internet accounting require a new accounting model?

Purpose – The purpose of the paper is to illustrate the complexity surrounding the meaning of the terms “economic reality” and “neutral representation” as these terms are applied to the resolution of financial accounting issues. Design/methodology/approach – The paper examines the concept of epistemological objectivity in financial reporting through an analysis of issues raised by the US Securities Exchange Commission (SEC) with respect to accounting for internet activities and the concomitant manner in which the US Financial Accounting Standards Board (FASB) approached these issues. Findings – An analysis of communications between the SEC and the FASB pertaining to accounting for internet activities reveals that, while these bodies seek to resolve issues in a manner that is neutral and objective, they often employ subjective reasoning in pursuing their regulatory purpose, thus raising questions about the extent of their concern with neutral representations of economic reality. Originality/value – The paper adds to the criticisms of efforts which claim to be neutral representations of economic reality.