The Reporting Boundary may be the single most important key to enabling a system of reporting that includes the 'externalities' that are presently ignored by the prvalent GAAP financial accounting metrics.

Many years ago I was the CFO of a modestly sized US based international company. Though we appreared to be a single company to our customers, suppliers and so forth, we were in fact the consolidation of more than thirty separate legal entities ... and from an operating standpoint we had performance accounting about some 26 different operating units. We reported as a single unit, but we made decisions based on the data from 30 or 26 different subsidiary units. For this company, everything associated with these subsidiary units was internal to our performance.

For all of my career ... about 50 years ... the reporting boundary that is used almost exclusively for financial reporting is the legal entity that is at the 'top' of a group of companies and 'qoted' on a stock exchange or used otherwise as a financing vehicle.

It is, for example, Exxon Mobil, the company, that is the entity around which a financial reporting boundary is drawn. In this situation it is only the money costs that are included in the accounting for the performance of the company, and in this reporting, there are substantial profits that are reporting.

Let us take a different boundary for reporting. Let us include not only the Exxon Mobil corporate entity, but also the various places where Exxon Mobile extracts petroleum from the ground or under the sea. When the boundary includes these places, there has to be an accounting for the fact that the places have depleted resources at the same time that Exxon Mobile is reporting huge profits for its investors.

Sometimes people argue that we keep discovering more and more oil, and therefore there is nothing to get concerned about. This may be true in terms of the next year or two or ten, but it begs the question. The fossil fuel resources are a finite resource that took multi-million years to create, and we have consumed a big proportion of the known fossil fuels in the past 200 years, and in the next 100 years we might easily consume the rest. What happens then? In geological terms, the consumption has been instantaneous relative to the creation of these resources.

One way to set the reporting on a better path would be to have all entities that use natural resources to incluce within their reporting boundary the consumption of the resource. Using the idea of 'replacement cost', then the costs of fossil fuels then has to include the cost of replacement using the best available renewable ... and, of course, this changes everything.

Place ... Community

If the reporting boundary is applied to a place, or a community, then all the economic activities in the community should be included.

The place is something that does not change over time.

I grew up in Okehampton, a small town in Devnshire in England. It is an old town already settled in 1066 and details of the town are recorded in the Domesday Book commissioned by William the Congueror to inventory the country he had conquered. The modern census data may be compared to the old Domesday Book data to get some idea of changes over time

In the context of modern socio-economic performance metrics the State of the place at a point in time may be compared to the State of the place at another point in time to determine the Progress of the place.

It is to be expected that some thing will improve, and some thing will not. State is something that includes everything that has impact on the socio-economic situation for people, place and planet.

Economic activities that are implemented by an organization may be associated with the organization for its own consolidation. The same data are used for the consolidation or roll-up into the organization that are used for the consolidation or roll-up into the place / community.