The Accounting Historians Journal Vol. 13, No. 1 Spring 1986
Nasuhi Bursal THE OHIO STATE UNIVERSITY
THE USE OF INTEREST AS AN ELEMENT OF COST IN GERMANY IN THE 16TH AND 17TH CENTURIES
Abstract: Debate still continues in the United States of America over the inclusion of interest as an element of cost. The practice was accepted as early as 1558 in Germany, and has been integrated into accounting theory by Schmalenbach in this century.
Over the last decade, at least one authority1 has strongly advo-cated the recognition of interest on equity as a cost. The proposal has received mixed responses from other scholars, among them a reminder [Previts, 1974] of the equity interest controversy in the early 1910's.2 This issue has a history, not only in the United States, but also in other countries. This note describes the history of the equity interest concept in Germany, mainly based on a doctoral dis-sertation by Juerg Schueppenhauer3 completed in 1971. Schueppen-hauer's quotations from original sources are presented here in the same format, preceded by short summaries.
One of the key economic issues of the Middle Ages was the de-termination of a fair price (justum pretium) which is related to the usury dogma of the Christian Church and to the prohibition of in-terest by Canonic Law. One way of securing fair prices was to set tariff rates on essential consumer goods. For other goods and ser-vices, prices could be negotiated by the contracting parties within the limits of the natural price (pretium naturale). Natural prices con-sisted of three components; purchase cost and labor being the two basic ones. The third element represented an exception from the interest prohibition. Application of a certain percentage on pur-chasing and labor costs as "interest" was allowed to protect against damage or loss (damnum emergens) and foregone profit (lucrum cessans) for term sales. Although this latter part of the interest al-lowed essentially corresponds to regular interest on credit sales, its interpretation as "foregone profit" already points to the origin of the opportunity cost concept. The first known document that includes such an interest calculation dates back to Meder in 1558.4 In a total