The Development of Accounting Principles
by JOHN W. QUEENAN Partner, Executive Office
Presented before the Connecticut Society of Certified Public Accountants, New Haven—November 1966
THE CONTROVERSY over comparability in corporate financial reporting
continues to grow. We see evidence of this growth not only in professional
accounting literature but also in newspapers and financial magazines. We hear this controversy discussed among our business associates,
our educators, and our legislators.
All the reasons for this heightened interest in corporate financial reporting are not clear. I believe that it is the natural result of the high level of business activity, with the consequent increase in the number of users of financial statements. But, more specifically, this added interest may be attributable to the rise in merger activity, which has tended to focus attention on differences in reporting practices; and to publicity concerning methods of reporting used by companies that have found themselves in financial difficulties. Other contributing factors may be the continued emphasis on comparing companies and operating periods on the basis of earnings per share, return on investment, and other statistical
measures of corporate earning power; and increased investor interest in corporate affairs, as evident in questions raised at meetings of shareholders of publicly owned companies.
Professional accountants have a particular interest in this controversy
because, for the most part, the conflict arises out of the questions of what should constitute generally accepted accounting principles and what body or bodies should be responsible for their development.
UNIFORMITY VS. FLEXIBILITY
Much of the recent criticism of generally accepted accounting principles,
in their present form, has been advanced by a few members of our profession through public expressions of dissatisfaction with the progress being made in developing accounting principles and in narrowing
differences in practice. Not surprisingly, some segments of the public
also are suggesting that accounting practices are inadequate or even misleading; after all, they are being told by some accountants that this is so.
Also, there is a tendency by some to stress rigidity or uniformity in accounting—to say that things should be done in only one way. These