Securities and Exchange Commission Historical Society

The Richard C. Adkerson Gallery on the SEC Role in Accounting Standards Setting

Accounting and Auditing in the 1930s

The Status of GAAP

"I am very much afraid it is difficult to name many principles that are generally accepted."

- January 11, 1937 Carman G. Blough, "Some Accounting Problems of the Securities and Exchange Commission"

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.


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Footnotes:

(6) John L. Carey, The Rise of the Accounting Profession, From Technician to Professional — 1896-1936 (American Institute of Certified Public Accountants, 1969).

Related Museum Resources

Papers

July 31, 1913
image pdf (AICPA Collection, University of Mississippi)
April 1917
image pdf (AICPA Collection, University of Mississippi)
May 1929
image pdf (AICPA Collection, University of Mississippi)
1933
transcript pdf (Courtesy of the American Institute of Certified Public Accountants)
January 21, 1934
transcript pdf (Courtesy of the American Institute of Certified Public Accountants)
March 11, 1934
transcript pdf (Courtesy of the American Institute of Certified Public Accountants)
August 3, 1934
image pdf (Courtesy of the American Institute of Certified Public Accountants)
August 21, 1934
transcript pdf (Courtesy of the American Institute of Certified Public Accountants)
1934
transcript pdf (Courtesy of the American Institute of Certified Public Accountants)
January 1936
image pdf (AICPA Collection, University of Mississippi)
1936
transcript pdf (Courtesy of the American Institute of Certified Public Accountants)
January 22, 1936
image pdf (Courtesy of the American Institute of Certified Public Accountants)
March 1936
transcript pdf (Courtesy of the American Institute of Certified Public Accountants)
October 5, 1937
transcript pdf (Courtesy of the AICPA Library Collection, University of Mississippi)
October 19, 1937
transcript pdf (Courtesy of the American Institute of Certified Public Accountants)
October 20, 1937
transcript pdf (Courtesy of the American Institute of Certified Public Accountants)
November 5, 1937
transcript pdf (Courtesy of the American Institute of Certified Public Accountants)
December 23, 1937
image pdf (Courtesy of the American Institute of Certified Public Accountants)
December 27, 1937
image pdf (Courtesy of the American Institute of Certified Public Accountants)
1938
image pdf (AICPA Collection, University of Mississippi)

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