“It is difficult for me to see how anyone who has knowledge of accounting as it was practiced during the first quarter of this century and how it is practiced today can fail to recognize the tremendous advances that have taken place in the art. Accounting is an art and not a science.”
- January 13, 1967 Carman G. Blough, “Development of Accounting Principles in the United States”
Stung by criticism that the Committee on Accounting Procedure (CAP) did not reduce alternative accounting principles, the AICPA appointed a special committee to recommend “definite steps to lead in the thinking on unsettled and controversial issues.”(10) The committee’s report in September 1958 led to the establishment of the Accounting Principles Board (APB), replacing the CAP one year later.
Accounting research was considered critical. The new process anticipated that research studies would precede deliberations by the APB and that APB opinions ordinarily would be based on such studies. The special committee also envisioned that initial research would provide conceptual context from which the selection of principles by the APB would flow.
The AICPA established a semi-autonomous research division that was not responsible to the technical committees of the AICPA. In 1961, studies were published on the basic postulates of accounting and cash and funds flow. The third study in 1962, A Tentative Set of Broad Accounting Principles for Business Enterprises, was considered by the APB as “too radically different from present [GAAP] for acceptance at this time.”(11) As time went on, many APB Opinions would not be preceded by research studies. After three years, the APB had no results and turned to solving specific issues, just as the CAP had done before it.
APB membership differed little from the CAP. Initial membership of 18 was increased to 21 to better distribute the workload, and a two-thirds vote was required to issue an Opinion. In the mid-1960s, membership was reduced again to 18. Membership continued to be dominated by accounting firm practitioners, including representatives from each of the then “Big 8” firms. Industry and academia were also represented on the Board.
(10) October 1959 Organization and Operation of the Accounting Research Program and Related Activities.
(11) Reed K. Storey and Sylvia Storey, Special Report – The Framework of Financial Accounting Concepts and Standards (Financial Accounting Standards Board, Norwalk, CT).
