Securities and Exchange Commission Historical Society

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

Origins of the Relationship

Substantial Authoritative Support

- 1936 Occupations Related to Mathematics

The early days of the SEC were marked by the increasingly difficult common-law development of accounting precedents – case by case.  The notion of disclosure as acceptable alternative to correction had been painfully stretched in the Northern States Power case. 

The securities laws gave the SEC the clear authority – if not mandate – to make rules and regulations governing registrant financial statements, including methods to be followed in the preparation of accounts. In the 1930s, a broad-based body of generally accepted accounting principles was embryonic, at best, and Chief Accountant Carman Blough had argued that the SEC had neither the time nor resources to develop accounting standards.

But an elegant solution was soon devised. In April 1938 a still-divided Commission issued an “administrative policy” for financial statements in Accounting Series Release No. 4, centered on the notion of whether there was substantial authoritative support for accounting practices.

If financial statements were prepared in accordance with principles for which there was no substantial authoritative support, the SEC would presume that the statements were misleading or inaccurate, despite disclosures. If the Commission differed with a registrant on an accounting practice, disclosure in lieu of correction would be accepted only if there were substantial authoritative support for the registrant’s practice and the SEC’s position had not been expressed previously in an official release, including opinions of its Chief Accountant. Registrants could no longer attempt to cure accounting deficiencies with disclosure.


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Related Museum Resources

Papers

October 30, 1933
transcript pdf (AICPA Collection, University of Mississippi)
October 10, 1934
transcript pdf (with permission of the John F. Kennedy Library Foundation)
November 12, 1934
transcript pdf (Courtesy of the Library of Congress)
December 21, 1934
transcript pdf (Courtesy of the National Archives)
January 14, 1935
transcript pdf (AICPA Collection, University of Mississippi)
January 14, 1935
transcript pdf (with permission of the John F. Kennedy Library Foundation)
January 18, 1935
transcript pdf (Courtesy of Stephen Zeff)
March 19, 1935
transcript pdf (Courtesy of the Library of Congress)
June 4, 1935
image pdf (with permission of the John F. Kennedy Library Foundation)
January 18, 1936
image pdf (Courtesy of the Library of Congress)
February 13, 1936
image pdf (Courtesy of the American Institute of Certified Public Accountants)
January 8, 1937
transcript pdf (AICPA Collection, University of Mississippi)
January 11, 1937
transcript pdf (Courtesy of the AICPA Library Collection, University of Mississippi)
February 5, 1937
transcript pdf (Courtesy of the American Institute of Certified Public Accountants)
May 21, 1937
transcript pdf (AICPA Collection, University of Mississippi)
June 30, 1937
image pdf (Government Records)
November 22, 1937
transcript pdf (AICPA Collection, University of Mississippi)
December 27, 1937
transcript pdf (Courtesy of the American Institute of Certified Public Accountants)
December 27, 1937
transcript pdf (AICPA Collection, University of Mississippi)
June 30, 1938
image pdf (Government Records)
August 2, 1938
transcript pdf (Courtesy of the Library of Congress)
September 27, 1938
transcript pdf (AICPA Collection, University of Mississippi)
September 7, 1939
transcript pdf (AICPA Collection, University of Mississippi)
September 21, 1939
transcript pdf (AICPA Collection, University of Mississippi)
October 12, 1939
transcript pdf (AICPA Collection, University of Mississippi)
November 15, 1939
transcript pdf (AICPA Collection, University of Mississippi)
March 11, 1953
transcript pdf (Government Records)
October 16, 1954
transcript pdf (AICPA Collection, University of Mississippi)
March 10, 1956
image pdf (Courtesy of Gary J. Previts)
November 18, 1965
transcript pdf (AICPA Collection, University of Mississippi)

Programs

18 October 2011

Deloitte Fireside Chat VI: The SEC's Role in Accounting Standards Setting

Moderator: Mark Beasley

Presenter(s): Loretta Cangialosi, Robert Kueppers, Arthur Wyatt

21 April 2009

Fireside Chat - SEC Office of Chief Accountant

Moderator: Theresa Gabaldon

Presenter(s): John Albert, Gary Previts

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