Securities and Exchange Commission Historical Society

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

Finding the Right Structure

Accounting Principles Board (1959 - 1973): Operation

“You should bear this in mind: you can help in preventing the encroachment of government by participating directly in steps toward agreement upon accounting principles.”

- October 8, 1963 Excerpts from Speech by SEC Chairman William L. Cary before the Financial Executives Institute

Not until November 1962 would the Accounting Principles Board (APB) issue its first Opinion, comprising modest guidance on new tax depreciation rules. The members’ qualifications of their assents were almost as long as the Opinion’s seven paragraphs. The APB almost died aborning after its second Opinion was overruled by the SEC.(12)

The APB issued 31 Opinions in its brief life, including seminal guidance on leases, accounting changes, earnings per share, income taxes, equity method accounting, interim reporting, early extinguishment of debt, and the results of operations. In 1970, the APB issued two controversial Opinions related to accounting for acquisitions of businesses. The first included criteria for the purchase and pooling-of-interests methods. The second mandated amortization of acquired goodwill over a period not to exceed 40 years.

The two Opinions could have been issued as one, but would have included so many qualified assents that it might appear not to have the required two-thirds majority. The issues were separated into two separate Opinions to allow for dissents rather than qualified assents. The process was criticized and was a factor in studies leading to the Financial Accounting Standards Board (FASB).

Recalling the dying days of the CAP, the AICPA convened two study groups to consider how to improve accounting standards-setting in 1971. The first, chaired by former SEC Commissioner Francis M. Wheat, studied the APB to determine necessary changes to “attain better results faster.”(13)  Robert M. Trueblood, who had been both AICPA president and an APB member, headed the other group, reviewing the objectives of financial statements and problems in achieving those objectives.

The Wheat Study Group concluded that the APB was fatally flawed and recommended creating the FASB. The Trueblood Study Group laid the groundwork for the conceptual framework later developed by the FASB.

SEC Chief Accountant Andrew Barr served from 1956 to 1972, during almost the entire life of the APB. Aside from the investment tax credit fiasco and APB Opinion No. 2, he was generally supportive of and collaborated with the APB. He had a strong interest in strengthening auditor independence and evaluating independence based on “appearance” rather than the auditor’s “state of mind.” He contributed to actions to eliminate differences between disclosures in the Form 10-K and stockholder reports, and was a significant contributor to the 1964 amendments to the Exchange Act and improving reporting by banks, insurance companies and transportation entities.


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Related Museum Resources

Papers

1960 to 1964
document pdf (Courtesy of Richard Rowe)
August 30, 1960
transcript pdf (AICPA Collection, University of Mississippi)
October 25, 1960
transcript pdf (AICPA Collection, University of Mississippi)
Early 1960s
document pdf (Government Records)
March 6, 1962
transcript pdf (AICPA Collection, University of Mississippi)
February 5, 1963
image pdf (Courtesy of Stephen A. Zeff)
June 24, 1963
transcript pdf (AICPA Collection, University of Mississippi)
June 25, 1963
transcript pdf (AICPA Collection, University of Mississippi)
October 8, 1963
image pdf (Courtesy of Stephen A. Zeff)
October 23, 1963
image pdf (Courtesy of the American Institute of Certified Public Accountants)
June 23, 1964
transcript pdf (AICPA Collection, University of Mississippi)
June 29, 1964
transcript pdf (AICPA Collection, University of Mississippi)
September 1, 1964
transcript pdf (AICPA Collection, University of Mississippi)
March 24, 1965
image pdf (Courtesy of the National Archives and Records Administration)
April 29, 1965
image pdf (Courtesy of Stephen A. Zeff)
May 24, 1966
transcript pdf (AICPA Collection, University of Mississippi)
October 5, 1966
image pdf (Courtesy of Stephen A. Zeff)
May 1, 1967
transcript pdf (AICPA Collection, University of Mississippi)
June 27, 1967
transcript pdf (AICPA Collection, University of Mississippi)
June 30, 1967
image pdf (Government Records)
November 13, 1967
transcript pdf (Courtesy of the AICPA Library Collection, University of Mississippi)
June 30, 1968
image pdf (Government Records)
August 1968
SEC Accounting Series Releases 1 to 112, Inclusive

(Courtesy of Gary J. Previts)

March 27, 1969
Disclosures to Investors - A Reappraisal of Federal Administrative Policies Under the '33 and '34 Acts, by Francis M. Wheat (The Wheat Report - Disclosures to Investors)

(Courtesy of Richard Rowe)

June 30, 1969
image pdf (Government Records)
June 30, 1970
image pdf (Government Records)
October 20, 1970
image pdf (Courtesy of Stephen A. Zeff)
May 5, 1971
image pdf (Courtesy of Stephen A. Zeff)
July 1971
image pdf (Courtesy of Orestes Mihaly)
May 19, 1972
image pdf (Courtesy of Stephen A. Zeff)
June 1, 1972
Report of the SEC Advisory Committee on Enforcement Policies and Practices (Wells Committee Report)

(Courtesy of Robert Knuts)

October 18, 1972
image pdf (Courtesy of Stephen A. Zeff)
October 1973
image pdf (AICPA Collection, University of Mississippi)
September 1988
transcript pdf (Courtesy of JT Ball)

Oral Histories

17 February 2011

JT Ball

17 July 1992

Andrew Barr

(Courtesy of the Academy of Accounting Historians, University of Mississippi)

14 February 2011

Donald Hayes

Galleries

In the Midst of Revolution: The SEC, 1973-1981

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