Thomas A. Ratcliffe and Paul Munter TEXAS TECH UNIVERSITY
ASSET VALUATION: AN HISTORICAL PERSPECTIVE
Abstract: Asset valuation has been discussed in the accounting and economic literature for most of the twentieth century. In the literature, discussions ranged from advocating only historical costing to the use of current value accounting ex-clusively. This paper traces the development of theoretical and pragmatic discus-sions on the topic of asset valuation.
Inflationary pressures in the developing environment of account-ing have forced accountants to begin analyzing means of reflecting the impacts of inflation on financial statements. The notion of ac-counting for the effects of inflation on financial reporting is not new. During the early years of this century, the idea of current cost accounting was being deliberated. For example, Hatfield discussed current cost accounting as far back as 1909. Further, in discussing the differences between accounting income and economic income, Canning indicated a preference for current costs as a valuation mechanism. And in 1939, MacNeal went as far as to suggest that "truth in accounting" can only be attained when financial state-ments display the current value of assets and the profits and losses resulting from changes in these asset values.
This paper represents an attempt to trace the development of theoretic and authoritative thought concerning asset valuation issues. Two tables are presented to summarize this developmental process. Table I outlines the basic asset valuation conclusions of some classic theoretical works in accounting and business. While this annotated listing is not all-inclusive, it is representative of the related substantive works of this century. Table II summarizes the asset valuation conclusions in studies performed under the auspices of authoritative organizations within accountancy.
An analysis of the development of asset valuation thought reveals the reactive nature of accounting as a discipline. Seemingly with-out regard to the theoretical works on asset valuation, authoritative bodies in the accounting profession had not, by the 1930s, made