Presents a comment on the American Accounting Association. Recognition received by the association as a participant in the new three-level organization responsible for establishing financial accounting standards; Need for the Association to establish formal procedures for the selection of members to fulfill the Association's designated responsibilities; Efforts being made to strengthen the Association's regional organizations in order to facilitate the increased participation.

It is becoming increasingly difficult to discuss the concept of realization intelligibly. The Concepts and Standards Research Study Committee report does not conform to current practice. Current practice recognizes some unrealized elements and rejects other unrealized elements that can be measured with equal objectivity. In practice realization may be a rather imprecise descriptive term that is generally understood, but clearly it is not a crucial criterion in the recognition of changes in assets and liabilities. The author's own view is that in establishing criteria for the recognition of revenues the concept of realization is awkward, causing confusion rather than creating clarity. It is doubtful that the concept can be described to include all the revenues that belong in the measurement of periodic income and to exclude all others. The concept may be useful in reference to nor revenue changes in assets and liabilities, that are, in distinguishing between realized and unrealized holding gains and loss In this regard, however, perhaps an exchange transaction involving objectively measurable assets would suffice.

The omnipotence of historical costs in financial accounting is traditional. Traditions tend to be unyielding and revered; they cannot and should not be overturned lightly. Inroads, however, have already become well established. To the extent that accounting for the historical costs of current assets is presumed to embrace the attributes of relevance, objectivity, and inviolability, it is treacherous as well as traditional. If the primary goal of financial accounting is objectivity in the meaningful measurement of income and financial position, historical costs must give way to current market values and replacement costs. In the vast majority of situations such measurements are objectively feasible. Their use could go far in eliminating the manipulative aspects and inconsistencies in financial statements and in restoring their economic relevance. The inadequacy of historical cost information becomes less obvious to the outsider and the discrepancies between accountants' measurements and current exchange prices become less directly observable by the outsider, accountants' defenses seem to stiffen and conservatism and realization and historical costs are embraced as being of paramount importance.

Each of the eleven new statutes uses the terms "stated capital" and "earned surplus"; ten use the term "capital surplus" but the District of Columbia statute uses "paid-in surplus." Nine of the new statutes prohibit the sale of par value shares for less than par. Virginia and Maryland permit sale at less than par but without any contingent "discount liability." Although none of the eleven statutes requires a minimum consideration for no par value shares, ten statutes permit only that consideration received for no par value shares in excess of liquidation preferences be designated as capital surplus and six of these have an additional limitation that not more than 25 per cent of the consideration for no par value shares may be designated as capital surplus. One, the North Carolina statute, does not refer to liquidation preferences in connection with designations of capital surplus. Four statutes have not adopted the 25 per cent rule and Virginia has made it optional. All the statutes permit cash dividends on any class of stock to be declared "out of" earned surplus. All the statutes permit cash dividends on preferred stock to be declared "out of" capital surplus, some of these only under certain conditions, e.g., in the absence of earned surplus (six statutes). Four statutes permit cash dividends on common stock to be declared "out of" capital surplus, but two of these have conditions attached to the privilege. Only the North Carolina statute permits dividends to be declared "out of" current earnings in the absence of earned surplus. Each of the new statutes permits stock dividends to be declared "out of" either earned or capital surplus; two statutes permit stock dividends "out of" unrealized appreciation; nine statutes permit treasury shares to be issued as stock dividends although one of these, North Carolina, does not permit them to be called stock dividends. Nine of the statutes have provisions permitting the transfer of earned surplus to capital surplus.

Accounting analyses and generally accepted accounting practices have been influenced to a considerable extent by the law. The article presents a report of the survey of the legal literature to determine the extent to which those in the field of law have accepted the concept of the corporation as a legal entity, which has an independent existence quite separate and distinct from its officers and stockholders and the extent to which other concepts have been advocated. Because the significance of a legal concept ultimately depends upon its application in arriving at judicial decisions, the survey induced the examination of cases where the court's concept of the corporation was a material factor in arriving at its decision. The results of the survey suggest that considerable caution is warranted in the evaluation of the acceptability of accounting procedures that hinge upon a particular legal interpretation. Specifically, the results of the survey suggest that the acceptability of accounting analyses cannot with confidence be based entirely upon a particular legal concept of the corporation.

The article critically examines the extent to which significantly unique results are obtained when differing concepts of the corporation are made the basis for the analyses of transactions involving changes in the accounts relating to the interests of corporate security holders. In order to limit this presentation, only three such transactions will be considered in this article. Those selected are transactions involving interest charges, income taxes and dividends, transactions which are sometimes held to affect the measurement of income and sometimes treated as distributions of income. There has been considerable controversy in the accounting literature with respect to the nature of these items and their analysis should therefore constitute an acceptable test of the significance of the underlying corporate concept and the validity of the approach here employed. Four concepts of the corporation will be utilized. The first two underlies the proprietary and entity theories of accounting, respectively, as those theories are generally propounded. The third concept is the notion underlying the enterprise theory of accounting. And the fourth concept seems to be the one most frequently reflected in current accounting practice.

Reviews the book "Revenue Recognition," by Arthur L. Thomas.

Reviews the book "A Survey of Accounting Ideas--With on Approach Based On 'Claims To Services'," by G. D. Roy.

This article explores the business entity concept of the 1964 Concepts and Standards Research Committee of the American Accounting Association and its significance to accounting. The committee's study of the business entity concept has caused it to depart significantly from the concise statement of the concept contained in the 1957 Revision. The committee believes that in referring to concepts underlying the conventions of accounting the use of the term business is inappropriately restrictive. The committee suggests that, in accounting, the term entity concept be used. In accounting the entity with which one is concerned may be defined as an area of economic interest to a particular individual or group. The boundaries of such an economic entity are identifiable by determining the interested individual or group, and by determining the nature of that individual's or that group's interest. An economic entity encompasses the activities, events, and utilization of resources that affect the interest of the individual or group. Simply stated, the committee advocates a user-oriented approach in defining an entity. That is, accounting reports about entities are developed to meet the needs of particular individuals or groups.