There Is No Universall Accounting Theory

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There Is No One Universally Accepted Accounting Theory

There is no one universally accepted accounting theory


Accounting theory construction began in the 1920's , beginning with the works of such writers as Paton (1922,) Hatfield (1927) and Canning (1929) and accounting started to become a discipline (promoted from the technical book-keeping) out of Economics. It began to take strange different roads from the beginning as the authors of the earlier works did not refer to the works of either their predecessors or contemporaries. There was no linkages or "developmental thread" from one argument to the next (AAA, 1977 pp 5). This train of divergence has been aptly described by Chambers when he termed the history (of accounting thought) as a "series of disconnected episodes" (1965 p 33). These disconnected episodes have continued to the present day but attempts have been made by various organisations ( e.g. AAA's SOATATA, 1977) and writers including Laughlin & Puxty (1981) Davis et al (1982), Whittington (1986), Chua (1986), Laughlin & Gray (1987) and (Velayutham & A. Rahman (1992) to categorise these apparently divergent theory sets and make some sense out of them.

We shall review each of these attempts beginning with SOATATA :

AAA (1977): Statement of Accounting Theory and Theory Acceptance

The Committee on Concepts and Standards for External Financial Report of the American Accounting Association (AAA) was given the task of writing a statement that "would provide the same type of survey and distillation of current thinking on current accounting theory" in the manner of 'A Statement of Basic Accounting Theory' (AAA, 1966) had done a decade earlier.. Events had overtaken the AAA in a decade; instead of economics and business, accounting had started drawing upon mathematics, psychology, sociology and other disciplines and accounting researchers had employed new tools and techniques from these disciplines resulting in a wide variety of theories instead of just one. This led the committee to prepare a Statement on Accounting Theory and Theory Acceptance (SOATATA) instead of preparing a statement of accounting theory as the body of accounting literature had not come up with a compelling basis for specifying the content of financial reports (AAA, 1977, p1).

The committee concluded that there was no single universally accepted accounting theory but a multiplicity of theories. Instead of specifying an accounting theory, it went on to analyse and categorise the various theories and sought to explain why the accounting community had failed to achieve theory closure.

According to SOATATA, divergent theories arose because of differences in the specification of 'users' of accounting information and the 'environment' in which users and producers of accounts are thought to behave. The SOATATA committee sought a theory that is general enough to cope with variety and specific enough to offer assistance to accounting policy-makers but what they found was a collection of theories which they categorised , according to how they were constructed into

1. classical - inductive and true income

2. decision usefulness and

3. information economics:

The true income and inductive theories arose from ...
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