A Historical Look at U.S. GAAP
Texas Woman’s University
School of Management
Dr. Pamela Baker
January 26, 2013
This paper discusses the historical development of generally accepted accounting principles through its contributing sources from 1930 to the present. U.S. Businesses had been using double entry accounting since the 1800s yet no uniform accounting practices had been introduced until the American Institute of Accountants (AIA) recommended to the New York Stock Exchange in 1932, …”five broad principles of accounting which have won fairly general acceptance…”, (Zeff, 2005, para. 4). In which, the terms “fairly present” and “in accordance with” were first used followed up with “generally accepted accounting principles”. Later, a sixth principle was approved. These recommendations were based on the three assumptions that all business transactions were apart from the business owner, all transaction currencies measured in the US dollar, the assumption of time and the matching principle. Thus establishing a foundation of which all future accounting principles are based. The AIA formed the Committee on Accounting Procedures (CAP) to publish Accounting Research Bulletins (ARB) on GAAP under the authority of the Security and Exchange Commission (SEC) created by the Securities Act of 1934. The CAP was later reorganized into the Accounting Principles Board (APB) that issued Opinions between 1959 and 1973. The Financial Accounting Standards Board (FASB) has been the source for private sector generally accepted accounting principles since 1973. Input by the private sector has been crucial to the development of GAAP since 1930. Historically, GAAP is influenced by the business condition and public interest.
The Great Depression left the public with little faith in the private sector. Although the knowledge and experience of businesses would be consulted for standards; businesses were not trusted to set...
References: Financial Accounting Standards Board. (1962). APB 2: Accounting for the “Investment Credit”. Retrieved from http://www.fasb.org/cs/BlobServer?blobkey=id&blobwhere=1175820900137&blobheader=application%2Fpdf&blobcol=urldata&blobtable=MungoBlobs
Financial Accounting Standards Board. (2006). Summary of Statement No. 157. Fair Value Measurements. Retrieved from http://www.fasb.org/summary/stsum157.shtml
Financial Accounting Standards Board. (2012). International Convergence of Accounting Standards –Overview. IASB-FASB Update Report. Retrieved from http://www.fasb.org/jsp/FASB/Page/SectionPage&cid=1176156245663
Seidman, L.F. “The Role of the Accounting Profession in Preventing Another Financial Crisis.” U.S. Senate Banking, Housing, and Urban Affairs Subcommittee on Securities, Insurance, and Investment [Testimony]. FASB. April 6, 2011.
Zeff, S. A. (2005). The Evolution of U.S. GAAP: The Political Forces behind Professional Standards. The CPA Joural, Retrieved from http://www.nysscpa.org/cpajournal/2005/105/infocus/p18.htm
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