ACCT20074 Contemporary Accounting: Paradigm Shift Analysis

This report provides a critical analysis of Thomas Kuhn's theory on paradigm shifts, as presented in his book *The Structure of Scientific Revolutions*, and its application to the field of accounting. It examines the pre-paradigm, normal science, and revolution phases, highlighting how scientific progress isn't continuous, but rather characterized by revolutionary shifts. The report then focuses on the contributions of Professor Ray J. Chambers, particularly his concept of Continuously Contemporary Accounting (CoCoA) and exit-price fair value accounting, which challenged traditional accounting principles. It discusses the relevance of Chambers' work in the modern accounting environment, considering criticisms and the evolution of accounting standards, such as the 2018 conceptual framework published by the IFRS. The analysis emphasizes how Chambers' theories aimed to address limitations in historical cost accounting and provide more relevant financial information, reflecting market conditions and economic realities. The report concludes by assessing the lasting impact of Chambers' ideas and their alignment with Kuhn's theory of paradigm shifts, emphasizing the continuous evolution of accounting practices to adapt to changing business environments.

Running head: CONTEMPORARY ACCOUNTING
Contemporary Accounting
Name of the Student
Name of the University
Author Note

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Table of Contents
Introduction and Executive Summary..........................................................................................2
Kuhn’s Paradigm and structure of scientific revolutions.............................................................2
Chamber’s revolutionary contributions.......................................................................................4
Critical appreciation of Chambers’ contributions........................................................................6
Conclusion...................................................................................................................................8
References..................................................................................................................................10

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Introduction and Executive Summary
The main aim of this report is to conduct a critical analysis and application of Thomas
Kuhn’s theory on paradigm shifts and his observations about the structure of scientific
revolutions. After which, the focus of the research shifts to the contributions of Professor Ray J
Chambers to the field of accounting. An application of Kuhn’s theories is then made to
understand the nature of the changes brought about by Professor Chamber’s contributions and
their relevance in the modern day accounting environment. The research has revealed that
Kuhn’s theory has suggested that the scientific progress achieved in any field is not a continuous
process and there occurs a revolution which changes the entire structure of the way that field
functions. This is the reason why some of the theories suggested at a particular point of time
become irrelevant in the future. This is because of the fact that their limitations become too
apparent. However, this is not the case with the theories of Professor Chambers as they are
considered to be very relevant in the modern day.
Kuhn’s Paradigm and structure of scientific revolutions
The findings of Thomas Samuel Kuhn in his book The Structure of Scientific
Revolutions suggests that there are three phases in the way in which scientific progress in a
particular field occurs. These are known as the pre-paradigm phase, normal scientific phase and
the revolution phase (de Oliveira Pires, 2013). The pre-paradigm phase is a regular phase in
which there are no accepted scientific theories and there are a lot of theories that compete with
each other to become the widely accepted theory. Hence, paradigm can be suggested as an
acceptable model or pattern that records most of the governing principles of a particular topic.
Once a particular theory is accepted as one that constitutes a paradigm, the next phase known as
the normal scientific phase begins. In this phase, the theory which becomes accepted in the pre-

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paradigm phase is taken as a basis for the researches that occur in the future in that particular
area. After which the paradigm shifts again due to the emergence of a new phase called as the
revolution phase. The revolution phase is an important phase. It causes a complete shift in most
of the accepted principles up to that point and the field moves towards what is popular as the
paradigm shift (Kuhn, 2012). This occurs due to the discovery of new principles which were not
known to have existed before. There are a vast number of anomalies or inconsistencies
discovered in the old paradigm which causes a crisis in the particular paradigm. These
anomalies are the reason why a particular paradigm begins to become irrelevant after a certain
point. Another reason for this occurrence is Kuhn’s rationale that only one paradigm can exist at
a particular point of time. The lack of interaction between paradigms occurs due to the
differences in the timelines and knowledge levels of the experts existing at that particular point
of time. Young scientists often tend to be different from their older counterparts and hence the
findings of these scientists are mostly related to a completely new area which was not known to
have existed before (Weinert, 2014). Kuhn further suggests that the change in paradigm causes
discontinuities in the growth of the knowledge acquired in a particular field and any further
findings related to that particular area are not undertaken anymore. However, he suggests that the
old paradigm cannot be considered to be completely irrelevant as there occur situations in which
the new paradigm draws some parallels from the old paradigm. Another concept that was
highlighted by Kuhn in his book was the problem of ‘incommensurability’ (Hoyningen-Huene,
2015). This is known as the specific characteristics of a particular area that are limited to that
area itself and cannot be translated or identified in another area. Although his views support the
theory of evolution, it is different from what is generally accepted as evolution. Kuhn suggests
that a shift in paradigm is also a form of evolution. It is the change in which science overcomes

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its previous flaws and finds new facts rather than developing its theories on the basis of the old
paradigms. Hence, on an overall basis, it can be suggested that Kuhn’s views hold that a
paradigm is the result of the environmental conditions existing at a particular point of time and it
is bound to end at some point because of the complexities involved in staying relevant over a
period of time. These complexities include but are not limited to technological changes, legal
environment, operating conditions and requirements of a particular research undertaken by a new
researcher.
Chamber’s revolutionary contributions
Raymond James Chambers is considered to be one of the pioneers in the modernisation
and development of accountancy in its present form. One of his most significant contributions to
the field of positive accounting is the concept of Continuously Contemporary Accounting
(CoCoA) (Clarke, Dean & Persson, 2018). This concept was built out of the concern that
Chambers had about the traditionally accepted principles of accounting. He suggested that the
accounting principles that were in practice at that time were extremely limited. The purpose of
accounting should not be to only act as a subject which maintains a record of the assets and
liabilities of a company at their historical costs. It should provide more relevant information
according to the market conditions existing at a particular point of time and address conditions
like fluctuating price levels. He also noted the presence of an anomaly in the books of accounts
prepared by an entity. While the cash and bank balances in the assets of an organization are
shown according to the date of the balance sheet, other assets were calculated on the basis of the
day on which they were purchased (Andon, Baxter & Chua, 2015). As noted by Kuhn, this
caused information asymmetry in the information communicated by the same balance sheet.
Further observations were made by Chambers about the need for a further development in the

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definitions of assets and liabilities and other basic accounting terms like revenues, expenses,
distributions and contributions. In other words, he stressed on the need to change the widely
accepted accounting framework and develop it further to include the uncertainty and economics
aspect involved in the field of accountancy. The development of the CoCoA also came from his
need to solve several accountancy problems which he considered to be recurring in nature. They
include the undervaluation and overvaluation of assets and liabilities, especially during mergers
and takeovers by a particular business, including both specific price changes and general level
price changes in accounting for various items and to overcome the legal anomalies which he
thought were extremely prevalent at that time in Australia. As suggested by Kuhn, this approach
of Chambers was based on his thoughts of moving to a new paradigm in accountancy which
overcame the flaws in the old paradigm and becomes the basis on which new researches in
accountancy would be built on. He strongly believed that accountancy was a linguistic subject
which communicated to the users of the financial statements and hence it needed to be as
accurate as possible in any given situation. Apart from CoCoA, the other significant contribution
of Chambers was towards the exit-price fair value accounting. In the modern day accountancy,
this is also known as the net realisable value accounting. In this case, Chambers argued that
while entry or purchase prices were useful in deciding whether to invest in a particular asset or
not, they were not the end and means of the decisions taken by a firm. The success level of any
particular firm depends on its ability to adapt to changing business conditions. Hence, he went on
to suggest that the financial position of a firm should reflect its capacity to interact with the
existing business environment at a particular point of time. The main rationale behind the exit-
price theory was that for a firm to be able to generate cash on an immediate basis, it can only sell
the particular assets at exit prices. As the ultimate purpose of any asset is to generate revenues

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for the firm, it becomes imperative to note them at their fair values on the date of purchase of the
asset. This concept of net realisable value was classified by him as money equivalent. As
suggested by Kuhn, the main reasons for the development of an effective theory by Chambers is
the lack of interaction with the other old theories and the finding of anomalies which made him
doubt the basic quality of the subject itself. This lack of interaction is the reason behind his
revolutionary approach to accounting in which he overcame what he perceived to be the flaws in
accountancy. He used the knowledge acquired from various fields like statistics, economics and
law to formulate a new system of accountancy whose role went beyond acting as a measure for
the maintenance of records.
Critical appreciation of Chambers’ contributions
During the majority of his career, Chambers had to deal with a lot of people who were
completely convinced about the merits of the traditional form of accounting and did not give
much importance to the theories suggested by him. However, there were people at the time who
agreed that his suggestions were probably the way forward for accounting. However, all of his
findings were not considered to be without any flaws. One of the criticism levied was against his
suggestion that accounting measurements using a mixed system of accounting could not produce
an informative total. However, if the purpose of accounting in such situations is only to act as a
recording tool and not as a measuring tool, then the total provided by such a system can be
considered to be reliable (Persson, 2013). Another criticism against the CoCoA is that recording
assets at market values is also not a correct measure of knowing the value of the assets. This is
because every asset, along with its disposable value also includes the cost of disposal which
should also be considered when selling off an asset. This was also a criticism against the exit
price model of fair value accounting. However, Chambers clarified the distinction between what

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he considered to be liquidation used during the normal course of business and spot liquidation.
The spot liquidation needed to be applied in cases of emergencies like bankruptcy where the
assets need to be sold at a quicker notice than during the normal course of the business. Another
criticism levied against the theories suggested by Chambers is that they make financial
statements too complex. Most of the information communicated by these statements is difficult
to understand already. The application of the concepts like inflation and exit price accounting
would make accountancy more challenging for the users without the required technical skills
(Munteanu et al., 2014).
However, it can be suggested that the prominence of the theories suggested by Chambers
has increased significantly in the recent years. The most important changes that have been
brought to the field of accountancy in the recent years is through the change in the 2018
conceptual framework published by the IFRS. The governing and regulating bodies have become
more aware about the need for communicating information in a transparent manner. Hence, the
new framework has made changes to the definitions of assets and liabilities (Conceptual
Framework for Financial Reporting, 2018). . Emphasis has increased on the aspect of accounting
for uncertainty. This is because of the numerous frauds that have occurred through financial
statements over the years due to the lack of proper information communicated by them. In the
new definition of assets and liabilities in the accounting framework, both of them are clearly
referred to as economic obligations and economic sources whose ability to generate the inflow or
outflow of funds is dependent on a variety of factors. Hence, it should not be taken for granted
that an asset will generate income regardless of the situation. Another concept introduced by
Chambers and is considered to be extremely relevant even in the modern day is the fair value
accounting. Due to its nature of communicating the prevailing market prices of some of the

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assets, it has become more widely used in preparing most of the financial statements. It not only
indicates the market conditions but also the regulatory and financial environment prevailing at
the time of preparing the financial statements (Masoud & Daas, 2014). With regards to intangible
assets, Chambers suggested that the value of an entity is not entirely dependent on the value of
its tangible assets. The company generates intangible assets without which its value would not
remain the same. Hence, the contribution made by these items should be properly recognised in
valuing a particular business. Accounting and valuation for intangibles is an important aspect in
the valuation of a business in modern day mergers. It ensures that a business is properly valued
and there is no overpayment or underpayment made for acquiring a particular business. The
latest theories suggested in accountancy have all been towards communicating relevant
information to the stakeholders which was the main aim of Chambers during his lifetime as an
accounting theorist.
Conclusion
From the above discussion, it can be suggested that Kuhn’s theory of scientific structures
suggests that in any particular field, a paradigm shift occurs due to the discovery of a new theory
which makes the previously existing set of principles irrelevant after that point. However, it may
not always be the case as proved by the theories proposed by Chambers. These theories were
criticised and deemed to be irrelevant at the time they were proposed. However, the shifts
occurring in accountancy in the recent periods add more relevance to the suggestions made by
Chambers and make his contributions more relevant in the modern day.

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References
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accounting useful. Journal of Management Studies, 52(7), 986-1002.
Clarke, F., Dean, G. W., & Persson, M. E. (2018). Accounting Thought and Practice Reform:
Ray Chambers’ Odyssey. Routledge.
de Oliveira Pires, F. (2013). Thomas Kuhn's ‘Structure of Scientific Revolutions’ applied to
exercise science paradigm shifts: example including the Central Governor Model. Br J
Sports Med, 47(11), 721-722.
Hoyningen-Huene, P. (2015). Kuhn’s Development before and after Structure. In Kuhn’s
Structure of Scientific Revolutions-50 Years On (pp. 185-195). Springer, Cham.
IFRS. (2018). Conceptual Framework for Financial Reporting [Ebook]. Retrieved from
https://www.ifrs.org/-/media/project/conceptual-framework/fact-sheet-project-summary-
and-feedback-statement/conceptual-framework-project-summary.pdf
Kuhn, T. S. (2012). The structure of scientific revolutions. University of Chicago press.
Masoud, N., & Daas, A. (2014). Fair-Value Accounting's Role in the Global Financial Crisis?:
Lessons for the Future. International Journal of Marketing Studies, 6(5), 161.
Munteanu, V., Copcinschi, L., Laceanu, A., & Luschi, C. (2014). FINANCIAL REPORTING
FROM THE REFERENCE THEORIES'PERSPECTIVE. Knowledge Horizons.
Economics, 6(1), 9.
Persson, M. E. (2013). The rise and fall of comprehensive accounting theories: RJ Chambers and
continuously contemporary accounting. Available at SSRN 2329188.
Weinert, F. (2014). Lines of descent: Kuhn and beyond. Foundations of Science, 19(4), 331-352.