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THE NATURAL BUSINESS YEAR:
A REVIEW OF ACCOUNTING LITERATURE
FROM 1915 THROUGH 1988 SHOWS A SHIFT
OF PROACTIVE TO REACTIVE BEHAVIOR
BY ACCOUNTANTS
by
Richard Vangermeersch
The University of Rhode Island
Mark Higgins
The University of Rhode Island
The Tax Reform Act of 1986 brought
back the topic of the Natural Business
Year in a shocking manner to accountants.
The hard work of over seventy years was
lost, as individuals and partnerships effectively
lost the Natural Business Year alternative.
This paper traces the proactive accounting
development of the Natural
Business Year concept to the reactive
mode of the last three decades.
Fifty articles on the Natural Business
Year were chosen for review from the
literature from 1915 through 1988. The
beginning of this literature was impressive,
both in the quality and quantity
aspects. Robert H. Montgomery chaired
the Special Committee on Distribution of
Work of the American Association of
Public Accountants [AAPA, 1915]. Elijah
Watt Sells published perhaps the major
piece of literature on the Natural Business
Year concept in 1926. A.C. Littleton's effort
with the Bureau of Business Research
of the University of Illinois in 1926 is a
close second. The late 1920's and the
1930's marked the start of a very aggressive
campaign by the A.LA. to increase
business adoption of the Natural Business
Year concept.
Montgomery rejoined the fray in 1936.
However, it was the Natural Business Year
Council that provided the strongest focal
RICHARD VANGERMEERSCH
point for this quest. While the membership
was inclusive of the financial community,
the chief impetus was the
American Institute of Accountants. Much
success was achieved in the late 1930's and
early 1940's.
There was a noticeable switch in the accounting
literature from financial accounting
to tax accounting starting in the
194()'s. There were only two academic-type
articles of a financial accounting
nature reviewed in this later period. Chatfield
in 1964 published an article which
should become the basis for a more
scholarly relook at the topic. Fogg and
42 The Accounting Historians Notebook, Spring, 1990
