My understanding is that accountants prepare accounts in accordance with GAAP. Tax computations take the GAAP numbers as a starting data point and then adjust back to tax law. For example accountants will post a depreciation journal. The tax professional will reverse this depreciation journal and create a capital allowance, based on tax law.

Reporting unrealised gains/losses in the P&L account would not effect tax. Again, the tax professional would reverse out such accounting entries and apply the tax laws, which provide that tax is only paid when investments are actually sold.

I would imagine Charlie Munger's beef with the accounting profession and their standards, is that they often have accounting treatments that are just plain stupid. For example, when Berkshire owns Coca-Cola since 1998 and never sells. If the stock market says, it is worth $20 billion as at 31 Dec 2022 and then $40 billion as at 31 Dec 2023, then a $20 gain (less deferred tax) is added to net profit. That is simply crazy, as the intrinsic value is unlikely to have changed that much in 12 months. It causes the reported earning to be overstated in some years and understated in others. It introduces unnecessary distortions and confusion. It's just not helpful to users of accounts in understanding the performance of the business and its investments.

Charlie Munger was also irritated by the auditors at Daily Journal. I am not sure exactly what his beef was there but I know Charlie said Daily Journal's accounts do not in any way reflect the economic reality of the business. I know, for example, Daily Journal expenses the Journal Technology development costs, as they are incurred and only recognises income when implementations have gone live and the customer is happy to pay for the development. That lacking of 'matching' income and expenditure, probably caused a problem for the auditors. Charlie Munger would probably have argued that his way was the best way, as it is 'prudent'. He might have argued that there is no guarantee that the customer would be happy with the development and may never pay anything. He would have preferred to have pleasant surprises for his shareholders, rather than potential disappointments. He would be of a strong view that accounting should be prudent and conservative, which is perhaps not always conventional thinking, for CEO's and CFO's, with incentives to promote stock prices to realsie personal share option harvesting.

I appreciate this is accounting 101 and apologies if it's incorrect, or patronising. Let me know if you think I can learn something...