CHAPTER 1

STANDARDS

a. Separation of investment and management

The purpose of accounting is to furnish financial data concerning a business enterprise, compiled
and presented to meet the needs of management, investors, and the public. Accounting standards
therefore become responsible for furnishing guideposts to fair dealing in the midst of flexible rules
and techniques.
b. Public aspects of corporate administration
The public aspects of corporations call for recognition by corporate management of public
responsibilities, acceptance of such responsibilities calls for the development and use of
corporation accounting standards.
c. Position of the professional accountant
The public accountant should be fortified by a framework of authoritative concepts and
standards, technical and interpretative, to which particular issues may be referred. Unfortunately,
professional accountants have not yet had the benefit of a clear-cut system of standards to furnish
guidance and support, a condition which has rendered the burden of discharging their full
obligations an almost impossible task. Public accountants must assume their full share of
responsibility for the preparation of accurate and informative reports on the operations of
business.
d. Character of accounting standards
A statement of accounting standards should represent an integrated conception of the function
of accounting as a means of expressing the financial facts of business in a significant manner.
Standards should deal more with fundamental conceptions and general approaches to the
presentation of accounting facts than with questions of precise captions, degrees of subdivision,
and detailed methods of estimating. Standardized accounting suggests prescribed procedures and
limited freedom to vary therefrom. Accounting standards are not in themselves procedures they
point toward accounting procedures, that is, toward rules which cover the details of specific
situations. Standards, therefore, should not prescribe procedures or rigidly confine practices;
rather standards should serve as guideposts to the best in accounting reports. Standards will need
to be expressive of the best type of deliberately chosen business policies; such standards,
therefore, would be the ones which could be accepted by business men generally as pointing the
way to good accounting practices.