Why Study History? To identify consequences of past actions and decisions To prevent repeating errors of the past To understand the present and its relationship to the past To become acquainted with our roots and provide continuity To consider evolving needs for accounting information

History of Accounting Accounting Antecedents – Writing, arithmetic, private property, money, credit, commerce, capital 7500 B. C. first records relating to agriculture and taxes 6000 B. C. First coins minted 3500 B. C. Clay tablets used 3000 B. C. Invention of writing, Arabic numbers and decimal system, paper, medium of exchange, private property 5 th Century B.C. (wages, inventory, asset acquisitions, audits, responsibility accounting for construction and agriculture)

History of Accounting Abacus appeared in China (1200 A.D.) Magna Carta signed (1215) Accounting added to curriculum at Oxford University (1249) Adding machine invented (1372) South Sea Bubble burst (1420) Luca Pacioli wrote Summa, first official book on accounting (1494) Trade and commerce of the Renaissance (1300 – 1500) Corporations created in England (1650) U. S. Federal Accounting System created (1789) First U.S. accounting book (1789)

History of Accounting Industrial Revolution (1800’s) – Joint ventures and corporations (separation of ownership and management; stewardship and return) Companies Acts in England (1845) American Association of Public Accountants (AAPA) formed (1886) Civil War (1861 – 1865) Cash register invented (1879) Interstate Commerce Commission created (1887) Tabulating machine invented for U.S. Census (1890) Haskins Sells organized (1895) War Revenue Act to raise money for Spanish American War (1899)

History of Accounting 1 st audited statements (1903) New York creates law for Certified Public Accountant (CPA) International Congress of Accountants organized accounting profession in U.S. (1904) Journal of Accountancy published (1905) Interstate Commerce Commission seeks to set up uniform accounting for railroads through Hepburn Act (1905) 1909 Revenue Act assessed excise tax on corporations in U.S. Accounting machine created for National Cash Register Company (1909) 16 th Amendment to U.S. Constitution establishes Income Tax (1913) Federal Reserve Board created (1913) Clayton Anti-trust Act created the Federal Trade Commission (1914), promotes private sector audits

History of Accounting American Accounting Association formed as AAUI (1916); became American Accounting Association (AAA) in 1935 AAPA became American Institute of Accountants (AIA) in 1916 Uniform CPA Exam (1917) offered by AIA; 8 Rules of Professional Conduct and Model CPA Law “Uniform Accounting” published in Federal Reserve Bulletin (1917) National Association of Cost Accountants formed (1919), later became National Association of Accountants and then the Institute of Management Accountants (IMA) American Society of CPAs (ASCPA) formed (1921); later merged into AICPA General Accounting Office, later called the Government Accountability Office (GAO) created (1921) Beta Alpha Psi established (1922) IBM introduces punched card that is machine readable (1928) Stock Market Crash (1929) Great Depression (1929 – 1939)

History of Accounting Ultramares case involving negligence and fraud (1931); accountants could be sued by non-clients New York Stock Exchange requires audits (1932) AIA and NYSE attempt to develop GAAP (1932)—5 broad principles became 1 st chapter of ARB #1; to consider interests of investors and external financial statements SEC established. Securities Acts of 1933 and 1934; given authority to prescribe accounting principles and reporting practices; required audits by CPAs “Match King” (Ivar Kreuger) dies; pyramid stock scheme revealed, (1932) American Woman’s Society of CPAs (1934) AAUI becomes American Accounting Association (AAA) in 1935 Phrase GAAP first used (1936) by AIA ASCPA and AIA merge, creating AICPA (1936)

History of Accounting AAA Tentative Statement of Accounting Principles Affecting Underlying Corporate Annual Reports (1936) AICPA Committee on Accounting Procedure created (1936); issued Accounting Research Bulletins (ARB) 1939 SEC issues Accounting Series Release 4, includes requirement of substantial authoritative support (1938) AICPA Statement of Accounting Principles issued by Sanders, Hatfield, and Moore (1938); McKesson and Robbins case (1939) revealed fictitious assets and profits; auditing procedures expanded Generally Accepted Auditing Standards (1939) Patton and Littleton’s Introduction to Corporate Accounting Standards (1940); historical cost and matching The Basis for Accounting Principles—Scott (1941) Institute of Internal Auditors formed (1941) Income Tax Withholding to help pay for WWII (1943) ARB #32 issued by CAP –unusual and extraordinary items disclosures (1947)

History of Accounting America’s first commercial computer, UNIVAC 1, delivered to Census Bureau (1951) CAP codified Accounting Research Bulletins (ARB) into ARB 43 (1953) 1 st computer software for accounting (payroll) (1953) Internal Revenue Code (1954) allows historical cost depreciation (1954) American Institute of CPAs (AICPA) formed from AIA (1957) AICPA Accounting Principles Board formed to replace CAP (1959); issued Opinions; research segment Accounting Research Study #1 Basic Postulates of Accounting by Moonitz (1961) Accounting Research Study #3 Tentative Set of Broad Accounting Principles by Sprouse and Moonitz (1962) APB Opinion 2 Accounting for Investment Tax Credit (1962) ARS 5 (1963) Combinations SEC issues ASR 96 allowing both flow through and deferred methods for investment tax credit (1963) Inventory of GAAP by Grady (1965)

History of Accounting AAA recommends accounting professors have doctorates (1965) A Statement Of Basic Accounting Theory (ASOBAT) issued by AAA (1966); relevance, verifiability, freedom frombias, and measurability; oriented to user AICPA issued Horizons for a Profession recommending a common body of knowledge and a five-year education requirement ARS 10 (1968) Goodwill Tax Reform Act of 1968 changed focus of tax code from economic focus to social objectives Continental Vending case (1969) relying on GAAP not sufficient to protect against litigation APB issued Statement 4 Basic Concepts and Accounting Principles Underlying Financial Statements of Business Enterprises (1970); service activity, diverse users

History of Accounting AICPA Wheat Committee called for alternative to APB (1972) Financial Accounting Standards Board created to replaced APB (1973); statement, interpretations, technical bulletins, statement of financial accounting concepts AICPA Trueblood Committee identifies objectives of accounting (1973); emphasis on external users International Accounting Standards Committee (IASC) established (1973); became IASB in 2001; issues IASs and IFRS Equity Funding collapsed; computer fraud involved (1973) Cohen Commission warns of expectation gap (1974) First personal computer invented (1975) Moss/Metcalfe Committees recommend increased regulation of accounting profession (1976); lack of independence and failure to protect the public Foreign Corrupt Practices Act forbids bribery and requires effective internal control systems (1977) AAA issues Statement on Accounting Theory and Theory Acceptance (SATTA) in 1977; International Federation of Accountants (IFAC) is formed (1977)

History of Accounting FASB issues Statements of Financial Accounting Concepts 1-7 ( ); the Conceptual Framework Electronic spreadsheets (VisiCalc) produced by Apple (1979) Single Audit Act (1984) established guidelines for audits of state and local governments AICPA/NASBA approves Uniform Accountancy Act (1984) Emerging Issues Task Force created by FASB (1984) Savings and Loans collapse ( ); Congress considers taking over the issuance of accounting standards and oversight of auditors Tax Reform Act of 1986 AAA publishes Anderson and Bedford Reports, offering criticisms and suggestions for accounting education (1986) Treadway Commission reports on fraud and expectations gap (1987) 150-hour requirement for membership in AICPA (1988)

History of Accounting World Wide Web became available to the public (1991) Jenkins Reports recommends enhanced business reporting model (1994) AICPA launches Vision Project (1995) More AICPA members employed in industry than in public accounting (1996) AICPA launches Business Valuation credential (1997) AICPA introduces Certified Information Technology Professional designation (2000) Enron and Arthur Andersen (2001) scandals World Com scandal (2002) Sarbanes Oxley Act (2002); PCAOB created; SEC must draft a report on principles- based standards Norwalk Agreement between IASB and FASB (2002) PCAOB issues first auditing standards (1-3) (2004), #4 in 2006, #5 in 2007, and #6 in Computer-based testing for CPA exam (2004) July 1, 2009 FASB Accounting Standards Codification goes “live,” replacing the Hierarchy of GAAP

People and History of Accounting Ball Barr Beaver Bell Beresford Blough Briloff Brown Burton Canning Edwards Grady Hatfield Horngren Ihlanfedt Jenkins Jennings Kohler Kuhn Littleton May Metcalfe Montgomery Moonitz Moore Pacioli Patton

People and History of Accounting Ross Sanders Scott Sorter Spacek Sprouse Sterling Storey Trueblood Watts Zeff Zimmerman

Additional Historical Developments What additional historical developments need to be added for the 21 st Century?