"And he asks good questions. For example, what is real? In the bubble preceding the Great Recession of late 2007 to 2009, “much of the profit and wealth turned out to be illusory,” Pollock observes. The collateral for a mortgage loan is not really the house itself, a real thing (in a sense), “but the price of the house,” which “has no objective existence.” The same goes for “liquidity.” What is it? It disappears when a financial bubble—such as the increase in house prices that preceded the Great Recession—bursts. Liquidity “is about group behavior and group belief in the solvency of counterparties and the reliability of prices.”
The entities that accounting deals with are not facts, but opinions. Accounting figures are based on subjective estimates of unknowable future events, theories about these events, and even political influences (when accounting standards are decided). Pollock quotes an expert in accounting theory, Professor Baruch Lev: “Despite widely held beliefs that corporate financial statements convey historical, objective facts, practically every material item on the balance sheet and income statement, with the exception of cash, is based on subjective estimates about future events.”"