TA vs GAAP (from a LinkedIn conversation)

Similar benefits for TA also apply to Lean Accounting and Marginal Costing.–me

From Tony Rizzo:

“Constraints-Accounting, that to which you refer as TA, is useful when one’s questions are designed to enable one to MAKE more money. The corresponding calculations are entirely consistent with the laws of physics; they yield measurements that are indispensable for making relatively near-term (operational) decisions consistently optimally.
GAAP accounting and transfer-pricing techniques that are acceptable to tax-authorities are useful when one’s questions are designed to enable one to KEEP more money, well AFTER having made that money. The corresponding calculations have no basis in the laws of physics. They are, instead, legislated by politicians whose questions are designed to enable them to TAKE more money, from all those who make money. These calculations yield measurements that grossly confound one’s view of reality, particularly when answers are needed, which enable one to MAKE more money.

Both sets of calculations are necessary, because the two sets satisfy distinctly different needs, neither of which can be ignored for very long. The former set satisfies the need for information that is consistent with physical reality. The latter set satisfies the need to avoid incarceration.

Cordially,
Tony Rizzo
tony.rizzo@pdinstitute.com”

About Brian D Gregory MD, MBA

Board Certified Anesthesiologist for 30 years. TOC design and implement for 30 years. MBA from U of Georgia '90: Finance, Data Management, Risk Management. Practiced in multiple US states and Saudi Arabia at KFSH&RC and KFMC Taught residents in two locations. Worked with CRNAs for 20 years.
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