"I am very much afraid it is difficult to name many principles that are generally accepted."
The dawning of the twentieth century did not include a plethora of developed accounting standards. Technical literature was sparse and, except for the Journal of Accountancy, launched in 1905, and a few short-lived publications and textbooks, there was little communication among accountants on accounting matters. Even the term "generally accepted accounting principles" (GAAP) was not in vogue until the late 1930s.
While financial presentations usually included a balance sheet and a statement of profit and loss, there were few protocols. Consolidated financial statements, for example, were rare. Sales and cost of sales frequently were not disclosed. In 1909, one accountant noted, "Our brethren of the law have the Supreme Court to whose dictates they must conform ... in our profession it is left to each individual to be a law unto himself, and the result is a mass of conflicting opinions on many subjects, each one of which receives its value principally from the reputation of the person holding it, or the more or less convincing way in which he can express it." (6)
One of the first technical documents on accounting and auditing was the Federal Reserve Bulletin of 1917 (originally published as Uniform Accounting), drafted in large measure by an American Institute of Accountants (AIA) committee on federal legislation. However, while purporting to promote uniformity, it left most accounting choices to professional judgment. The Bulletin was revised and reissued in May 1929.
In an effort to stem concerns that inferior reporting practices had contributed to the 1929 crash, the AIA began a cooperative effort with the New York Stock Exchange in 1930 to improve financial disclosure. They agreed on five principles that they presumed would be included in a contemplated statement of broad principles of accounting which had won fairly general acceptance.
Thus, when the securities laws were enacted, there was precious little authoritative GAAP and no mechanism for issuing regular pronouncements on accounting principles.
(6) John L. Carey, The Rise of the Accounting Profession, From Technician to Professional — 1896-1936 (American Institute of Certified Public Accountants, 1969).
