A survey of consolidated financial statement practices conducted by the American Institute of Certified Public Accountants in the mid-fifties pointed up the lack of, and consequently the need for, uniformity in consolidation practices. In an apparent attempt to get some degree of uniformity in the consolidation area the Institute's Committee on Accounting Procedure in the late fifties issued Accounting Research Bulletin No. 51. While only time will tell whether the recommendations of the Committee are widely adopted in practice, they have already had, in this writer's opinion, far-reaching effects upon the teaching of consolidations. The Bulletin has had and will undoubtedly continue to have a tremendous influence on teaching in such areas as what to consolidate, when to consolidate, and how to consolidate. Its greatest impact, however, from the teaching standpoint has probably been felt in the area of intercompany profit transactions.

Reviews the book "Computer Language," by Harry Colman, Clarence Smallwood and George W. Brown.

The leaders of the accounting profession in the U.S. have frequently expressed the fear that the profession may some day be subjected to onerous statutory control. The profession in the Great Britain at the present time does practice under a more detailed statutory control than that imposed upon accountants in the U.S. This situation provides a clinical case worthy of study. The time period selected for study is that beginning in 1844 and ending with the present time. The year 1844 was selected as the beginning date because in that year the modern era of business incorporation methods came into existence, i.e., a business could be incorporated merely by a formal process of registration. That the quality of an audit of a complex set of transactions is likely to be no better than the qualifications of the auditor performing the audit would appear to be a sell-evident truism. Yet this is a quite modern concept that has emerged in comparatively recent times. Prior to 1844, the general body of proprietors tended to elect two groups of representatives. The one, designated as the managers, operated the enterprise, the other, called the auditors, ascertained that the results of the managerial activities were properly reported back to the main body of proprietors.

On December 10, 1959, the Company Law Committee was appointed by the President of Great Britain Board of Trade to investigate and recommend changes in the current company law, primarily in the Companies Act, 1948. Lord Jenkins, a prominent British jurist, was appointed chairman, and included among the other thirteen members were William H. Lawson, past-president of the Institute of Chartered Accountants in England and Wales, and William Watson, a Scottish chartered accountant and treasurer of the Bank of Scotland. The Committee has now reported its recommendations. The Jenkins Committee sent a memorandum to certain organizations and individuals requesting their views on various aspects of companies' legislation. The Jenkins Committee made a number of recommendations, the majority of which are of comparatively little interest to the members of the American accounting profession. It is interesting to speculate whether the recommendations of the Jenkins Committee will be enacted into law. The Committee made no attempt to draft its recommendations into statutory form. It is therefore quite possible that the draftsmen of the bill will not carry out the Committee's intent in some areas.

Reviews the book "Inventories--A Guide To Their Control, Costing and Effect Upon Income Taxes," by Raymond A. Hoffman.

By Act No. 3329 of February 1955 the "Institute of Sworn-in-Accountants" was founded, in pursuance of Article 1 of the said Act its object is "to supervise audits of Greek financial organizations of whatever nature." More specifically than Article 37, Article 39 prescribes what persons may be appointed auditors if a request for an audit has been lodged. These persons may be prominent bank executives or government officials. They may be in active service or be superannuated. The Minister of Economic Affairs makes a choice from a list compiled by the various Ministries. The "auditors" thus appointed must be sworn. During the check they are considered to be government officials. The amount of their remunerations is also fixed by the Minister of Economic Affairs after the check. It is also important to state that at the moment when the limited liability companies officially listed at the Stock Exchange were obliged to allow audits by a member of the Institute, there were over 100 limited liability companies officially listed. After publication of the ministerial decision approximately 40 companies discontinued their quotations.

Although the product warranty has been in effect for many years, it is surprising to note that the existence of these warranties has almost been completely ignored in accounting literature. Very few, if any, of the standard textbooks at any level discuss the accounting problems concerned with the cost of product warranties. In addition, very little has appeared in the journals of the accounting profession on this subject. Probably one reason for this lack of knowledge is the circumstances surrounding the warranty itself. The long-term product warranty started small and was considered to be of little consequence. As its applicability increased, it was still ignored. An investigation to discover the practices that various companies used to account for the warranty cost revealed that warranties fall into three categories. These three are the reimbursed warranty, sales warranty, and expensed-warranty. As charges occur in connection with the warranty, they are treated as an ordinary sale except that the deferred revenue account is reduced rather than a receivable being increased.

Reviews the book "Federal Income Taxes," by Fred W. Norwood and Sam W. Chisholm.

Many accounting textbooks fail to analyze completely the causes of a change in gross profit. Typically, any change is first divided into the change in sales and the change in cost of sales. Each of these is in turn split into the change due to volume and the change due to unit prices or cost. This last breakdown is pictured as clear cut, and as easily determinable. Actually, the split between volume and price, or between volume and cost is not so easily determined. A portion of the change may be due to a combination of these factors, which are impossible to separate. The failure to point this out to students, especially to good students, leaves them confused on the whole problem. They fail to see the logic of the textbook presentation, and understandably so. It is a practical short-cut which ignores the realities of the situation, and departs in a degree from a purely logical basis. It is not intended here that the traditional way is wrong from a practical analysis viewpoint. It is contended, however, that an effort should be made to show the student what the realities of the situation are, and why the practical approach is followed.

The profitability of an investment proposal is dependent upon both the amount and the timing of its projected cash flows and that some means of establishing a basis for comparing cash flows over time is necessary in order to select the combination of investment proposals which is optimal. This is a complex problem but recent discussion has highlighted several points. Firstly, the measurement of the profitability of investments by means of the internal rate of return or marginal efficiency of capital suffers from the implicit assumption that the intermediate cash inflows produced by a project can be re-invested at a rate of return equal to the rate which is assessed for the initial project. As a result, it is necessary to introduce an independent discount rate to make comparable alternative projects. Secondly, for a corporation whose management wishes to act "in the interests of shareholders" and therefore aims to continually choose that financial position which maximizes its current stock prices and dividend.