The Accounting Historians Journal Vol. 14, No. 1 Spring 1987
David Solomons UNIVERSITY OF PENNSYLVANIA
THE TWILIGHT OF INCOME MEASUREMENT: TWENTY-FIVE YEARS
Abstract: The paper reviews events and trends since 1961, when the author incautiously forecast a possible decline in the importance of income measurement. He finds that little has changed in the intervening 25 years, and the forecast has not been borne out by events. Historical cost accounting has survived a period of serious inflation with hardly a dent. Earnings seem to be as important to financial analysts and to academic researchers as they ever were, and recent tax changes bring taxable income somewhat closer to accounting income than previously, thereby increasing the impor-tance of the income concept rather than diminishing it.
"Each of us sees the future differently, no doubt. But my own guess is that, so far as the history of accounting is concerned, the next twenty-five years may sub-sequently be seen to have been the twilight of income measurement."
The Accounting Review, July 1961, p. 383.
If I had realized in 1961 that I might be called to account 25 years later for that incautious statement, I would probably have been more circumspect than I was. I did, it should be noted, say "may be seen," not "will be seen," and I could hide behind that. But one should know better than to make anything but vague prognostications. Kierkegaard wrote that life must be lived forwards, but it can only be understood backwards. That seems to be as good an excuse as any for these reflections on my 1961 paper.
REASONS FOR PESSIMISM
Let me remind the reader why I took such a pessimistic view of income measurement. The statement quoted above came at the end of a paper in which I analyzed the differences between economic and accounting concepts of income. Accounting in-come, I argued, was incomplete because, aiming only to measure realized income, it did not take into account unrealized changes in the value of net assets accruing during a period, while it did