Abstract A recent survey by the Controllership Foundation to ascertain the public's acceptance of the facts and figures of business accounting disclosed several facts. The accountant is also confronted with the possibility that over-simplification of financial statements might easily result in confusion rather than clarity. The top managements, the controllers, the public accountants, the educators, the American Institute of Accountants, and the Controller's Institute of America have tremendous responsibility and an opportunity during the next five years to make the corporate annual report the keystone or media of communication to correct public and employee concepts of American business. Hence, improvements in financial statements and annual reports may well be the result of trial and error and certainly requires the exercise of good judgment and knowledge if continued improvement is to be had; innovations for innovation's sake are not satisfactory. Therefore, the controller and the public accountant are presented with a continuous challenge and grave responsibility to make the annual report more valuable and informative by their influence on its content and preparation; only through these combined efforts will the annual report gain the confidence of the public, labor unions, the investors and top management.

Abstract It is always difficult to disagree with the logic of an argument presented by Professor W. A. Paton. His article published in the January 1949, issue of the journal "The Accounting Review," presents a devastating barrage of reductio ad absurdum, invective, and fascinating wit, which may too readily be accepted by his readers. The issues at stake should be drawn dearly. Irrelevant comments and argument based upon false assumptions should be discarded before there is any disposition to repudiate the statement, Accounting Concepts and Standards Underlying Corporate Financial Statements. It should not be assumed that because of insistence upon the use of recorded cost as the only available objective information there is any suggestion of belief in or advocacy for the proposition that careful consideration should not be given to important changes such as may be found in price level changes and many other considerations. However, such considerations lie wholly beyond and outside of the area of basic corporate financial statements and at the same time may be said to lie within the area of managerial judgment, investment analysis, and interpretation. In the latter area, it is to be assumed that the accountant of integrity, competence and social responsibility may make a valuable contribution.

Given a sufficient number of instrumental variables significantly correlated with the investigational variables, consistent estimates of the coefficients of the linear relations can be determined (if they exist), without knowledge of the disturbance variances. The estimates are discussed from the viewpoint of probability convergence. In the case of two investigational and one instrumental variable, all three variables distributed on the normal surface, the distribution of the estimate of the coefficient is found exactly for all sample sizes, on certain hypotheses. The distribution function is remarkably simple. The applicability of the theorem to economic time series is discussed by (a) comparing the probability inferences derived from this Model A with those for the simplest stationary time-series model, termed Model B, and (b) by comparing the large-sample variances on several models. It is found that the theory can be used with confidence when the series are not too short and the error variances not too large. The theory is applied to a particular time series, showing that the accuracy of the estimate of the coefficient depends on the correlation between the instrumental variable and the two investigational variables. The theory to which reference is made in Sections II, III, and IV, relating to the two-investigational-variable case, is extended to many variables and tests are given, applicable when samples are not small, for determining the significance of coefficient estimates.

Abstract Committee of Accounting procedure of the American Institute of Accountants in Bulletin No. 35, dealing with the method of presentation of income and earned surplus, makes the recommendation that the net income for the period be shown henceforth without deductions or additions of items which are properly excluded from the determination of net income. These items consist primarily of charges and credits with respect to the following general purpose contingency reserves, discussed in Bulletin No. 28, inventory reserves, discussed in Bulletin No. 31, extraordinary items which, if included, would impair the significance of net income, discussed in Bulletin No. 32 and excessive costs of fixed assets and appropriations in contemplation of replacement of facilities at higher price levels, discussed in Bulletin No. 33. There is no argument with respect to items mentioned in Bulletins 28, 31 and 32 and it is gratifying that the committee recommends the exclusion of such items in the determination of corporate net income.