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Development of Accounting Principles in The Usa

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Hanis Zahira
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98 views6 pages

Development of Accounting Principles in The Usa

Uploaded by

Hanis Zahira
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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The Development of Accounting

Principles in the USA


The Development of Accounting
Principles in the USA
Formulation of accounting principles in the USA goes
through these four phases:

Management Contribution Phase (1900 – 1933)

Institution Contribution Phase (1933 – 1959)

Professional Contribution Phase (1959 – 1973)

Politicization Phase (1973 – present)


Copyright@2005 by Rohana Othman. All
02/27/2023 2
rights reserved.
Management Contribution Phase
• Management have complete control over format & content of
accounting disclosures
• Management intervention charactrized by Adhoc solutions to
urgent problems & controversies
• Implication of management initiatives
– Most accounting techniques lacked theoretical support
– Focus on determination of taxable income & minimize income tax
– Techniques adopted motivated by the desire to smooth earnings
– Complex problems avoided & expedient solutions adopted
– Different accounting techniques adopted by different firms for same
problems
Copyright@2005 by Rohana Othman. All
02/27/2023 3
rights reserved.
Institution Contribution Phase

• Increasing roles of institutions in the


development of accounting principles
• SEC created; AIA broad principles approved;
new role for Committee of Accounting
Principles (CAP)

Copyright@2005 by Rohana Othman. All


02/27/2023 4
rights reserved.
Professional Contribution Phase
• The intervention of professional associations and agencies in
the formulation of accounting theory was spurred on by the
efforts to eliminate undesirable techniques

• AICPA established the Accounting Principles Board (APB) &


Accounting Research Division

• The American Accounting Association (AAA) developed an


integrated ‘Statement of Basic Accounting Theory’.

Copyright@2005 by Rohana Othman. All


02/27/2023 5
rights reserved.
Professional Contribution Phase
• Dissatisfactions over the preparation of ‘Statement of Basic Accounting
Theory ‘
•The criticisms on the statement were
– It was not based on any established theoretical framework,
– the authority of the statements was not clear-cut; and
– the existence of alternative treatments allowed flexibility in the choice of
accounting techniques.

Copyright@2005 by Rohana Othman. All


02/27/2023 6
rights reserved.

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