Reviews the book "Essays on Accountancy," by A.C. Littleton.

The effects of price changes are far-reaching, hence in an attempt to suggest adequate techniques for recognizing and dealing with price changes, this research paper examines how should price-level data appear in accounting reports? To effectively measure the inflatory influences, The American Committee on accounting theory suggested that the primary financial statements should continue to reflect historical dollar costs but that the effects of price fluctuation should be measured by a general price index. Two things were important in this suggestion--first, that management "may" include supplementary reports adjusted for price-level effects, second, that the supplementary reports would be "income-statement and the balance sheet, both adjusted by the same procedures." As to the possibility of misleading the reader of financial reports, the AAA Committee proposal guarded against this by insisting that the regular reports should still be maintained on a strict historical cost basis, and the price level effects would be separated and presented in supplementary exhibits. But the preparation of supplementary reports resulted in two sets of statements which bounds to disturb some readers. The author suggests that this apparent difficulty, and some others related to various issues of financial reporting could be met effectively by the use of fund theory. The fund theory approach makes it possible to keep track of price-level shifts, without upsetting the validity and availability of historically oriented and objectively determined accounting data in records and reports.

Reviews the book "Principles of Estate Planning."

The article presents an exploratory study of the possibility that significant generalizations about accounting might be derived inductively. Different users of inductive method might arrive at apparently unrelated generalizations about an enterprise if each were observing different aspects of its behavior, like, cultural, political, social, or technological. The method emphasizes the economic enterprise rather than its "owners" or other associated factor suppliers, and also the character of the data, and the difference between observed data per se and analyses or other manipulations of the data. Applied to accounting, it would emphasize the difference between accumulated facts and interpretations of those facts, that is, periodic or other financial statements. This might make the periodic reports more understandable. The essence of all three of these "contributions" is that inductive method clarifies the nature and limitations of accounting data and of the interpretive reports reflecting those data. Further use of the method by accounting theorists may contribute to the solution of several of the contemporary issues in accounting.

A recent development surrounding income statement theory has indicated a trend toward a single-step form of presenting current income and cost data. This development, of course, is significant within itself, but in addition it has served to focus attention on the much broader problem of isolating principles of income statement form. The purpose of this study is to discuss critically some of the current problems of form. Also in the study, the traditional methods of classifying costs and revenues are evaluated, and alternative methods are suggested. The paper presents some of the working rules upon which a sound income statement can be based. The rules developed which appear to be tenable are: (1) Problems of form should be solved through a continuing analytical approach. Existing conventions, accepted ways of doing things, should be analyzed and changed, where current goals are not being attained. (2) The basic nature of the economic system in the United States supports the concept that there should be no ranking of costs, but that decisions are resultant of cost and revenue classification. The single-step form is desirable, therefore, unless special usefulness is created through departure from the single-step form. (3) Useful methods of classification include (a) functional classification, (b) object classification, and (c) management efficiency or economic classification. (4) Accounts should be designed to facilitate conduct of future and current affairs of the business. Financial statement information should be incidental to the construction of accounts rather than the sole purpose of account construction. (5) Uniform reporting should be encouraged for statements prepared for similar purposes within similar industries to aid in making comparisons.

Reviews the book "Management Planning."

Reviews the book "Federal Tax Reform," by Dan Throop Smith.

The article focuses on the Accounting and Reporting Standards for Corporate Financial Statements, 1957 Revision." The ideal statement of concepts and standards for published financial reports must represent some degree of compromise and generality. It cannot be expected to justify or condemn every procedure that might be adopted, nor to promote absolute uniformity. But it must provide a basis for judging issues that do in fact exist or that might reasonably arise in the preparation of financial statements. These issues do not remain fixed over time, nor do the methods of dealing with them stay settled. The 1957 statement-however acceptable for its time and situation-must be viewed as subject to revision and restatement; as subsequent events have broadened the area of discussion, revealed new problems, and changed attitudes and conclusions about some of the old ones. When one compares the 1957 statement with its predecessors, it is clear that one has come a long way. Yet, perhaps because of that progress, one may see clearly still more that could and should be done.

With the growth in the controlling shareholdings in subsidiary companies the presentation of a consolidated balance sheet in published reports has become the rule rather than the exception. The increase in the use of consolidated statements warrants a review not only from the standpoint of presentation but also from the standpoint of preparation in respect to certain aspects which are peculiar to consolidated statements. In the preparation of a consolidated balance sheet, the elimination of inter-company profits is limited to the interests of the parent company. This means the minority interests of the subsidiaries are considered as outsiders and the profit applicable thereto is properly considered as realized from the standpoint of the parent company. The net effect of this is that the amount of inter-company profit eliminated is represented by the amount of profit which has been taken up by the parent company as at the date of the balance sheet. This treatment is in conformity with the principle that the consolidation is merely a presentation of the parent company's position rather than a combination of the parent company and subsidiaries. Much of the confusion which exists can be traced to certain of the situations which have been outlined above. Of all the items mentioned the most significant lies in the area of recognizing that a process of substitution is taking place in presenting the consolidated statements rather than a process of combination, and that until such time as this basic principle is recognized misconception in the area of consolidation will continue to arise.

When treasury shares are acquired, the transaction results in the reduction of contributed capital, legal capital remains the same, and the restriction of retained earnings. If legal aspects are to be demphasized, it appears that the "direct adjustment to capital stock" is the best solution. But even though legal requirements are not ranked first in importance, they should not be forgotten. In this case, perhaps the "indirect adjustment to capital stock" is a better alternative. Accounting recognition must also include balance sheet classification as to Stockholders' equity. Differences in state laws would require a different arrangement. However, in both cases total invested capital remains the same. If a temporary restriction of retained earnings is needed, it can be shown in a footnote or as an appropriation of retained earnings. In a state which requires a permanent reduction of retained earnings, the nature of the transaction is a dividend rather than a "retirement." And so it must be recorded as a dividend. The nature of the transaction must be given first priority in recording treasury stock. Then, any legal aspects may also be satisfied in statement presentation.