We were going to have a Round Table discussion this coming week, but Labor Day has messed things up a little.  So instead, click on this link to see how lawyers view accounting, courtesy of the excellent law-professor blog The Volokh Conspiracy.  Lesson 1 is:  most of them know surprisingly little, even if they are preparing to practice business/corporate law.  Hmmnnn.. that starts to explain some things, doesn’t it.

From the post:

Law schools typically used to require a basic one semester class – often pass-fail – on accounting for lawyers. I took it, then concluded I needed something more advanced outside of the law school curriculum. But at a minimum, the accounting for lawyers class, while not requiring much in the way of actual accounting, introduced lawyers to the vocabulary and concepts of accounting. Somewhere along the way, twenty five or thirty years ago, the requirement was downgraded so that it became merely another upper level elective.

As time has gone on, I am increasingly convinced that was an unwise demotion – and not simply because I teach business law. You can’t read the front page of the Times or the Post these days without having a good chance of encountering the words “balance sheet.” Very often the term is being used in an extended policy sense – referring, for example, to the balance sheet of the Fed or even the US government. Unless my law students have had some undergraduate class in the subject, typically they would not have the faintest idea what that meant or why – even in a largely metaphorical sense (e.g., when the Economist magazine talks about the world’s balance sheet) – it is a relevant or important or meaningful way to express certain ideas. Leave aside the numbers, they simply have no idea what the vocabulary or underlying concepts are.

Ironically, when I was in law school, one of the reasons the class was demoted was not that the non-business oriented faculty dissed it. On the contrary, the corporate finance professors did not think it was important – pooh-poohing it as merely pointless recitation of historical events represented on the financials. They (we, let’s be honest) had fallen in love with the idea that accounting was a wall-flower at the finance dance compared to the new beauty, discounted/anticipated future cash flows and valuations based around market proxies themselves premised around efficient market theory. We weren’t wrong about future cash flows, but we now have a better understanding that accounting provides the framework against which one can work out one’s notions of the future and appropriate discounts.