ACCOUNTING AND FINANCIAL REPORTING IN A CHANGING ENVIRONMENT: HISTORICAL AND THEORETICAL PERSPECTIVES
(Essays in Economic and Business History Volume XVI 1998:307-329) Stanley C. W. Salvary, Canisius College
Over time, a changing environment has produced changes in the types of accounting information and in the dissemination of such information (financial reporting). Certain changes in the environment do impel changes in accounting. This paper examines various theoretical issues in accounting in a historical setting and provides some insight on the manner in which the accounting profession has responded to problems. 1 - MODELING REALITY IN A CHANGING ENVIRONMENT
Accounting has been in existence for about ten thousand years. emerged around 8,000 B.C. [Schmandt-Besserat 1986:36-37].
Three major functions
characterized the token system of accounting: data storage, communication, and an instrument of logic [Schmandt-Besserat 1986:36]. Moving forward from Shurupak (2600 B.C.) to Lagash (2450 B.C.) in Sumerian civilization, one encounters the science of administration. Shurupak and its earlier ancestors are responsible for the development of the science of administration while Lagash is credited for implementing it. It is the science of administration which has enabled the continuation and further development of civilization [Lambert 1960:1-13]. Sumerian Civilization was a city civilization. It is nevertheless clear that priests regularly served as managers, planners and co-ordinators of the massed human effort . . . The priests alone possessed the skills of . . . keeping accounts, without which effective co-ordination of community would have been impossible. . . . Writing began in Sumer as a symbolic accountancy, used to keep records of goods brought into or dispatched from temple storehouses. . . . [W]riting was used for temple accounts, secondarily to record economic contracts between individuals, and scarcely at all for other purposes [McNeill 1963:32-58].
In 1933-1934, the Persepolis Fortification Tablets were discovered. These tablets, which are comprised of Achaemenid clay, constitute administrative accounting controls that were
exercised by the state over food commodities in Parsa, Persia during the period 509-494 B.C. While the Persepolis Treasury Tablets (another set of tablets dating from 492-458 B.C.) deal with payments primarily in silver, all of the Fortification Tablets deal with food commodities. Most of the latter tablets pertain to the distribution of: (1) rations for workers (monthly and daily), travelers, and animals; and (2) bonuses for mothers giving birth [Vollmers 1996:7-9]. Today the concern for physical quantities still lingers on, but the concern for financial capital flows is dominant.
While it is clear that the accounting model, which is continually being refined technologically, has a very long history; as an administrative information science [Salvary 1985;1979], accounting is no stranger to the various problems associated with the development of a science. Historically debates in accounting on the appropriateness of the accounting model and realism in financial accounting measurement are incessant. For instance, over time and in recent years particularly with respect to the savings and loans associations debacle in the US [General Accounting Office 1989] - the term reality has been defined very frequently in various ways [Lee 1989:2-23; Nave 1993:64,68,69].
The aforementioned issues are examined within an evolutionary context, and concepts which are necessary and critical to the accounting model and financial reporting are identified. The rest of this paper consists of four parts: Changing Price Levels and Accounting Measurement, Financial Reporting to Business Reporting, General Comments on Financial Accounting, and Conclusion.
2 - CHANGING PRICE LEVELS AND ACCOUNTING MEASUREMENT
Prior to the 15th century, prices were established by...
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