Question

Financial Accounting Theory and Analysis by Schroeder and et al- Chapter 1- The developmetn of Accounting Theory:

1.  Explain Accounting in the Untied States since 1930.

Answer 1

from 1932-33 when stock market got crashed in 1929 , american institute of accountants laid down the five principles focussing on the fairness of the financial statements , and review of the finanacial statements by the auditor.

in 1934, two major securities act was approved by the the congress to ensure fairness of the securities market and restore the confidence of investors.

in 1936 american institute of accountants introduced the new concepts " general accepted accounting principles"(GAAP).

from1938 onwards congress permits new inventory method LIFO as official method for income tax purpose only , from 1939 institute recommends to use the words present fairly and in compliance with the GAAP while preparing the standard the standard audit report.

in 1953 the government made amendments to allow the companies to use accelerated historical depreciaton for in come tax purposes.

1960s was a period when US securities market become more competitive and sees various multinationals and conglomerate mergers.

in 1997 amazon.com and other high technology companies emphasised on the pro forma income under which all the negative items such as goodwill,amortization were placed below the line although they were formed a part of GAAP earnings.