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Current-Value Accounting I—Concepts

  • Robert W. Scapens
Chapter
Part of the Studies in Finance and Accounting book series

Abstract

Reference was made at the end of Chapter 4 to the assertion by the Sandilands Committee that the usefulness of C.P.P. financial statements will always be constrained by the deficiencies of historical-cost accounting. The introduction of concepts of value into financial statements, as recommended by the Sandilands Committee,1 implies a fundamental departure from the principle of historical cost. The objectivity of historical-cost measurements has been claimed as an important advantage of traditional accounting practice. The introduction of values into financial statements has been resisted because of the suggestion that they cannot be determined objectively. The following statement by Kelly is typical of the attitude of many accountants in past years:

[To] cut loose from the moorings of historical cost would open up a Pandora’s box of confusions, annual appraisals, complications and adjustments to recorded dollar valueschrw … since objective measurements beginning with the historical cost of fixed assets would be cast aside and be superseded by subjective measurements.2

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Notes and Reference

  1. 4.
    E. O. Edwards and P. W. Bell, The Theory and Measurement of Business Income (University of California Press, 1961 ) pp. 74–8.Google Scholar
  2. 6.
    J. R. Hicks, Value and Capital ( Oxford: Clarendon Press, 1946 ) p. 172.Google Scholar
  3. 10.
    K. MacNeal, Truth in Accounting (University of Pennsylvania Press/Oxford University Press, 1939 ).Google Scholar
  4. 11.
    R. J. Chambers, Accounting, Evaluation and Economic Behavior ( Englewood Cliffs, N.J.: Prentice-Hall, 1966 ).Google Scholar
  5. 12.
    R. R. Sterling, Theory of the Measurement of Enterprise Income (University of Kansas Press, 1970 ).Google Scholar
  6. 14.
    J. C. Bonbright, The Valuation of Property ( New York: McGraw-Hill, 1937 ).Google Scholar
  7. 15.
    For instance, see D. Solomons, ‘Economic and Accounting Concepts of Cost and Value’, in Modern Accounting Theory, ed. M. Backer ( Englewood Cliffs, N.J.: Prentice-Hall, 1966 ) pp. 117–40.Google Scholar
  8. 19.
    For instance, see R. H. Parker and G. C. Harcourt, Readings in the Concept and Measurement of Income (Cambridge University Press, 1969 ) p. 19.Google Scholar
  9. 21.
    See T. A. Lee, Income Determination: Theory and Practice (London: Nelson, 1974) ch. 6.Google Scholar
  10. 24.
    For instance, Edwards and Bell, ibid.; and L. Revsine, Replacement Cost Accounting ( Englewood Cliffs, N.J.: Prentice-Hall, 1973 ).Google Scholar
  11. 25.
    For a summary of this literature, see D. F. Drake and N. Dopuch, ‘On the Case for Dichotomising Income’, Journal of Accounting Research (Autumn 1965 ) p. 194.Google Scholar
  12. 27.
    For a further discussion of these and other concepts of capital maintenance, see R. S. Gynther, ‘Capital Maintenance, Price Changes and Profit Determination’, Accounting Review (October 1970) pp. 712–30.Google Scholar
  13. 29.
    A similar table was devised by R. S. Gynther, ‘Accounting for Changing Prices: Some Recent Thinking, Recommendations and Practice’, Chartered Accountant in Australia (December 1971).Google Scholar
  14. 30.
    Y. Ijiri, The Foundations of Accounting Measurement ( Englewood Cliffs, N.J.: Prentice-Hall, 1967 ).Google Scholar
  15. 34.
    Committee to Prepare a Statement of Basic Accounting Theory, A Statement of Basic Accounting Theory ( New York: American Accounting Association, 1966 ).Google Scholar
  16. 36.
    R. L. Mathews, ‘Income, Price Changes and the Valuation Controversy in Accounting’, Accounting Review (1968) pp. 509–16.Google Scholar
  17. 37.
    R. S. Gynther, Accounting for Price-Level Changes: Theory and Practice ( Oxford: Pergamon Press, 1966 ).Google Scholar
  18. 40.
    R. W. Scapens, ‘The Treatment of Changing Price Levels External Accounting Reports’, unpublished Master’s Degree Thesis, University of Manchester (1972).Google Scholar

Copyright information

© Robert W. Scapens 1977

Authors and Affiliations

  • Robert W. Scapens
    • 1
  1. 1.University of ManchesterUK

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