This article is based on the authors' observation on India, as well as other nations engaged in similar effort of pursuing the twin goals of developing its own capital markets and gaining productive access to global capital markets. Reaching these goals is crucial, so that the nation can build an economy that will prosper and improve the welfare of its people. The message of the authors is straightforward: (1) They want the reader to succeed (2) useful financial information is essential for that success, and (3) mere compliance with the traditional Generally Accepted Accounting Principles (GAAP) will never serve that purpose. This article challenges and inspires the readers to seek higher levels of financial reporting quality, and to assure them that their goals are within their grasp.

According to our vision for the future, global financial reporting can, should, and will take on a different nature. The key to its metamorphosis will be slow but sure, and eventually widespread, acknowledgment (by managers, auditors, regulators, and investors) that the path to national prosperity passes through the realm of truthful reporting in the capital markets, a place far removed from today's practices that are merely aligned with Generally Accepted Accounting Principles (GAAP). Our low opinion of the quality of virtually all current generally accepted practices is not academic pedantry; rather, it is the product of many years of studying, teaching, writing about, and participating (as insiders and outsiders) in the process by which these principles have been established. Specifically, there can be no doubt that the standard setting process in the United States and elsewhere has been highly political, with the consequence that issues have been poorly defined, inadequately analyzed and debated and seldom resolved with the goal of providing useful information to capital markets. Instead, the process's participants have engaged in self-serving political maneuvering, protecting what they consider to be their own interest, even to the detriment of society's interest in the strong, stable, and efficient financial markets.

The ultimate outcome of this political process is a body of accounting practices that are at best tolerated by capital markets, because they seldom come close in providing the useful information to investors and their advisors to make intelligent financial decisions. We see three important implications of this observation. First, national policy-makers must not be satisfied with the reporting system that considers GAAP compliance to be sufficient for creating capital market efficiency. Second, managers must not make the grievous error of believing that they can build mutually-advantageous and productive relationships with the markets by merely complying with the minimum requirements of GAAP.

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