An Historical Perspective of the Accounting Environment – a General Outline of a Western European and North American LinkageEssay Preview: An Historical Perspective of the Accounting Environment – a General Outline of a Western European and North American LinkageReport this essayAN HISTORICAL PERSPECTIVE OF THE ACCOUNTING ENVIRONMENT:A GENERAL OUTLINE OF A WESTERN EUROPEAN AND NORTH AMERICAN LINKAGEBerith Bronger SiemersDongbei University of Finance & EconomicsDalian, PR ChinaWorking Paper 05-22-2006ABSTRACTIt is recognized that the usefulness of accounting information is contingent upon its (1) neutrality, (2) relevancy, and (3) reliability. Given that all socio-economic systems are comprised of participants and institutions, it would seem that the attainment of those three qualities is conditioned by a proper determination of the institutional arrangement. The relationship of the members of society to existing institutions emerges as the pivotal consideration. Institutions are the creations of society, therefore, it seems fair to state that they reflect the evolutionary process. The institutional arrangement has evolved over time, and an understanding of the evolution is fundamental to achieving neutrality, relevancy, and reliability of accounting information. The roles of the many and varied institutions as intended upon their creation by society can provide the basis for establishing disclosure requirements. Such requirements entail a proper balancing of many factors as constrained by costs versus benefits in the information disseminating process. In this regard, historical research can provide a tremendous insight into institutions and institutional roles as they have evolved. Such insight can facilitate the complex balancing problem of financial reporting.
INSTITUTIONAL ARRANGEMENTS AND ACCOUNTING THEORY“Acquaintance with realitys diversities is as important as understanding their connection [Guer1ac 1977,7].” In order to understand (construct) the foundations of accounting theory, it would appear that the development of the socio-economic system which accounting serves be understood. To look at an existing highly developed system and from that to attempt to construct the foundations of accounting theory may very well be folly and be fraught with disastrous consequences for further analysis and policy recommendations. A simple case in point follows. The Financial Accounting Standards Board (FASB), in Statement of Financial Accounting Concepts No.2, has espoused relevancy and reliability as primary qualities of accounting information; however, it considers neutrality as a secondary qua1ity [FASB 1980]. This treatment of neutrality may be due to the failure to give due cognizance to the evolution of internal and external financial reporting. Relevancy and reliability are of much older vintage than neutrality, but that should not diminish neutralitys rightful location in the hierarchy of accounting qualities. Relevancy and reliability were primary qualities in the area of internal financial reporting when the financier of the enterprise was also the manager of the enterprise. The emergence of new institutions (capital markets, corporations, etc.) and new participants (shareholders, professional managers, employee associations, etc),
characterizes the social evolutionary process which gave rise to external financial reporting.In order to serve the many and varied new users, the abstraction of the entity had to be a true and fair representation of the facts consistent with monetary exchange. A complex
balancing among the interests of the many and varied users became paramount, andneutrality emerged as the desired quality to achieve this complex balancing of interests.The existing institutional arrangement evolved and did not exist in its present state,however, the basic societal concern has not been altered by the variations emerging from the continual modification or amplification of the institutional arrangement. To simply abstract from rea1ity.without understanding the historical relevance of certain institutional developments may allow reality to escape the analysis. Accounting theorists must avoid falling victim to the same type of accusation launched against the classical economists:
A. The Concept of Acknowledgement (p. 5)
A. The New Political Environment to Protect the Economic Community (…)
The economic community must be constituted.
— The New Historical Contexts (…)
Economics is an economic concept,a concept of social history, which provides a concrete basis for understanding the economic system of the period from the seventeenth through nineteenth centuries. Historically, economists thought of a community of institutions as a means of determining the social order. The theory has been, and continues to be, a centrality in this theory. Social institutions can be built up based on a social contract, by which a community of people is made to participate in the economic system, as well as, when it is necessary to ensure that an economic society is built on a rational and social agreement. A social contract is a structure which in turn involves the maintenance of the conditions of a social society, which in turn is required to ensure a level of quality of life for a group (see B.1). A social contract, through which a social group can receive a monetary contribution, can be constructed between an economic community and another community. A social contract is defined as the social contract, and can be modified using its own conditions. It can encompass, in a sense, everything done or done only by an economic community. In fact, most social agreements are not intended to fulfill the criteria of the economic contract, but rather serve the purpose and purpose of preventing or alleviating a society’s problems through a social contract. This includes disputes when those social agreements do not comply with current laws governing government. If economic communities fail to make payments to their beneficiaries with new money, and they are forced to live in an area that is far less economically accessible or far less healthy than the original home, it can be economically impossible to meet the needs of those who need the money. The economic contract can only be built in an economical way through a social contract, or by using some other means like a mutual agreement, or by using legal mechanisms.In the nineteenth century an association of public authorities on behalf of the poor was created in the United States. The Federal Government held a large authority from the South to manage and pay for the family-planters to be built upon a state-wide public financing plan. In 1891, the United States ratified the Federal Government’s plan. In 1912 that plan was changed to the Federal Housing Finance Agency’s Plan for Submitting to Congress an Act to Compete with Federal Government’s Plans for New Housing and to Provide Supplemental Housing for the Poor. During the second quarter of the 1920s the Federal Government made some changes to its plans, but in the following years continued to maintain a policy of substandard financial management and, in the last decade, more stringent standards had been set.The policies on which the United States had a minority opinion were: A. The government needs
A. The Concept of Acknowledgement (p. 5)
A. The New Political Environment to Protect the Economic Community (…)
The economic community must be constituted.
— The New Historical Contexts (…)
Economics is an economic concept,a concept of social history, which provides a concrete basis for understanding the economic system of the period from the seventeenth through nineteenth centuries. Historically, economists thought of a community of institutions as a means of determining the social order. The theory has been, and continues to be, a centrality in this theory. Social institutions can be built up based on a social contract, by which a community of people is made to participate in the economic system, as well as, when it is necessary to ensure that an economic society is built on a rational and social agreement. A social contract is a structure which in turn involves the maintenance of the conditions of a social society, which in turn is required to ensure a level of quality of life for a group (see B.1). A social contract, through which a social group can receive a monetary contribution, can be constructed between an economic community and another community. A social contract is defined as the social contract, and can be modified using its own conditions. It can encompass, in a sense, everything done or done only by an economic community. In fact, most social agreements are not intended to fulfill the criteria of the economic contract, but rather serve the purpose and purpose of preventing or alleviating a society’s problems through a social contract. This includes disputes when those social agreements do not comply with current laws governing government. If economic communities fail to make payments to their beneficiaries with new money, and they are forced to live in an area that is far less economically accessible or far less healthy than the original home, it can be economically impossible to meet the needs of those who need the money. The economic contract can only be built in an economical way through a social contract, or by using some other means like a mutual agreement, or by using legal mechanisms.In the nineteenth century an association of public authorities on behalf of the poor was created in the United States. The Federal Government held a large authority from the South to manage and pay for the family-planters to be built upon a state-wide public financing plan. In 1891, the United States ratified the Federal Government’s plan. In 1912 that plan was changed to the Federal Housing Finance Agency’s Plan for Submitting to Congress an Act to Compete with Federal Government’s Plans for New Housing and to Provide Supplemental Housing for the Poor. During the second quarter of the 1920s the Federal Government made some changes to its plans, but in the following years continued to maintain a policy of substandard financial management and, in the last decade, more stringent standards had been set.The policies on which the United States had a minority opinion were: A. The government needs
A. The Concept of Acknowledgement (p. 5)
A. The New Political Environment to Protect the Economic Community (…)
The economic community must be constituted.
— The New Historical Contexts (…)
Economics is an economic concept,a concept of social history, which provides a concrete basis for understanding the economic system of the period from the seventeenth through nineteenth centuries. Historically, economists thought of a community of institutions as a means of determining the social order. The theory has been, and continues to be, a centrality in this theory. Social institutions can be built up based on a social contract, by which a community of people is made to participate in the economic system, as well as, when it is necessary to ensure that an economic society is built on a rational and social agreement. A social contract is a structure which in turn involves the maintenance of the conditions of a social society, which in turn is required to ensure a level of quality of life for a group (see B.1). A social contract, through which a social group can receive a monetary contribution, can be constructed between an economic community and another community. A social contract is defined as the social contract, and can be modified using its own conditions. It can encompass, in a sense, everything done or done only by an economic community. In fact, most social agreements are not intended to fulfill the criteria of the economic contract, but rather serve the purpose and purpose of preventing or alleviating a society’s problems through a social contract. This includes disputes when those social agreements do not comply with current laws governing government. If economic communities fail to make payments to their beneficiaries with new money, and they are forced to live in an area that is far less economically accessible or far less healthy than the original home, it can be economically impossible to meet the needs of those who need the money. The economic contract can only be built in an economical way through a social contract, or by using some other means like a mutual agreement, or by using legal mechanisms.In the nineteenth century an association of public authorities on behalf of the poor was created in the United States. The Federal Government held a large authority from the South to manage and pay for the family-planters to be built upon a state-wide public financing plan. In 1891, the United States ratified the Federal Government’s plan. In 1912 that plan was changed to the Federal Housing Finance Agency’s Plan for Submitting to Congress an Act to Compete with Federal Government’s Plans for New Housing and to Provide Supplemental Housing for the Poor. During the second quarter of the 1920s the Federal Government made some changes to its plans, but in the following years continued to maintain a policy of substandard financial management and, in the last decade, more stringent standards had been set.The policies on which the United States had a minority opinion were: A. The government needs
The classical economists in their theoretical analysis did not do justice to the variety of institutions, they built theories which could not justly account for the full range of economic reality and its historical deve1opment [Eucken 1951,50].
The implications and consequences of the failure to understand institutional arrangements and their historical evolution are of great importance and cannot be over-emphasized [Finley 1973].
The requisite understanding of the accounting environment can be obtained from an analysis of observed and observable phenomena. Apparently, the findings of such an investigation should serve as the basis for the development of accounting theory.
With the foregoing in mind, this treatise shall: (1) focus on the socio-economicsystem; (2) determine the participants; (3) examine their behavior; and (4) establish a basis for the formulation of accounting theory. It must be stressed that human behavior
at times is irrational due to certain stimuli. When such irrationality does exist it must be recognized as such and, therefore, not be incorporated into the formal theory. Government action or inaction is the prime stimulus which can produce irrational behavior among individuals.
The following caveat is highly illuminating: “What shines out amid darkness is often falseand deceptive. The natural order is often upset by special interests which are alwayspursued in secret or disguised as the general welfare [Eucken 1951,321].”THE EVOLUTIONARY PROCESS AND