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PPP Series • Paper 6

The Accounting Blind Spot

Why financial reporting systematically undervalues long-term institutional assets. What we can't measure, we can't manage—and we can't protect.

SDGs:
8
12
16
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The 60-Second Version

Standard accounting sees costs but not the assets they create. This systematic blindness drives decisions that destroy institutional value.

When an institution invests in knowledge, relationships, resilience, or optionality, accounting treats it as expense—something to minimise. The intangible assets created are invisible to financial reporting.

This creates a systematic bias toward decisions that look good on paper but destroy real value. Cost-cutting that eliminates institutional memory. Efficiency drives that create fragility. Restructuring that severs relationship networks.

Until we can see long-term institutional assets, we will systematically destroy them.

What Accounting Cannot See

Institutional Knowledge

Visible (Expense)Salaries, training budgets
Invisible (Asset)Accumulated expertise, process wisdom
ConsequenceRestructuring destroys more value than it saves

Relationship Capital

Visible (Expense)Marketing spend, transaction costs
Invisible (Asset)Trust, legitimacy, social license
ConsequenceShort-term optimisation erodes long-term access

System Resilience

Visible (Expense)Redundancy costs
Invisible (Asset)Shock absorption capacity
ConsequenceEfficiency drives fragility

Future Option Value

Visible (Expense)Current utilisation
Invisible (Asset)Optionality, adaptability
ConsequenceOptimisation forecloses future choices

Part of the PPP Series

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R* Index

A measurement framework that sees what accounting cannot.

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