When Orest "Orry" Fiume was vice president of finance and administration for The Wiremold Company, a West Hartford, Conn.-based manufacturer of cable and wiring products, he recalls management meetings in which executives had difficulty stifling yawns while analyzing the company's standard cost accounting-based financial results.

"After about 30 seconds, you could see everybody else's eyes glaze over," Fiume recalls. "Because when you look at those statements, they're just unintelligible to anybody that doesn't have a degree in accounting."

Fiume, who led Wiremold's conversion to lean accounting in the early 1990s and went on to co-author "Real Numbers: Management Accounting in a Lean Organization," notes that once the company switched to a simpler financial statement that reflected the improvements being made by its lean efforts -- the "plain-English P&L," as it's called in the book -- the tone of those meetings changed dramatically.

"Once we went to the plain-English P&L, we could have a good management discussion about what was happening, because everyone could understand what they were looking at," Fiume says.

Fiume retired in 2002, but he still extols the virtues of lean accounting in various workshops presented by the Lean Enterprise Institute, where he is a member of the board of directors. In his presentations, Fiume shows how a standard cost-based P&L statement penalizes a fictitious manufacturer for reducing inventory, because the labor and overhead costs associated with the production of that inventory have been deferred to the balance sheet until the year the inventory is sold.

"When we reduce our inventory, or improve our inventory turns -- which is a good thing -- we have to take some of that labor and overhead from prior years that was capitalized on the balance sheet and we have to take it off the balance sheet," Fiume explains. "And the only place it can go is through the P&L."

Unfortunately, those deferred labor-and-overhead costs are buried on a standard cost-based P&L (usually showing up as an unfavorable overhead variance) -- which often prompts corporate brass to question the value of lean initiatives taking place in the company. The plain-English P&L, on the other hand, separates current operating information from the change-in-inventory information, presenting the latter on a separate line.

"Whereas standard cost accounting hides what is really happening [with shop-floor lean initiatives], lean accounting shines a light on it," Fiume says.