The Committee on Accounting Procedure had issued Accounting Research Bulletin Number 32, "Income and Earned Surplus." This issue of Journal of Accountancy contained an editorial about ARB 32, a paper attributed to George Bailey defending ARB 32, the text of ARB 32, and a letter from the chief accountant of the SEC saying that application of ARB 32 seems "to be susceptible to abuse and may result in misleading income and earned surplus statements in conflict with published rules and opinions of the Commission....
681) The Committee on Accounting Procedure has regularly supported exclusion of items from earnings "which would result in distortion or possible misleading inferences," and reaffirmed its position in Accounting Research Bulletin Number 32 which recommended exclusion under stated standards, but "the American Accounting Association has consistently advocated the all-inclusive theory...." (p.
6--Status of Accounting Research Bulletins" (1965), Journal of Accountancy, Vol.
Previously, the CAP had dealt with the tax effect of a timing difference between reporting accelerated depreciation for income tax purposes and recording straight-line depreciation expense for financial reporting purposes (Accounting Research Bulletin [ARB] No.
Committee on Accounting Procedure (1944), "Accounting for Income Taxes," Accounting Research Bulletin No.
(1947), "Current Assets and Current Liabilities--Working Capital," Accounting Research Bulletin No.
Possibly the first step could be the determination of the basic principles or postulates upon which accounting procedures are based, as a framework of reference for the solution of detailed problems; next might come the preparation of a fairly broad set of coordinated but not detailed principles, similar to the statements of the American Accounting Association; and finally could follow a consideration of more detailed matters, such as those covered by the present accounting research bulletins, but in relation to the basic broad principles....
The second type would be "Authoritative statements of generally accepted accounting principles, similar in standing to the present accounting research bulletins, and based upon studies made by the research group, [which] would be issued by a special 'Board' set up for that purpose." These statements were to be "based principally upon the publications of the research group." Indeed, the committee agreed that "An immediate project would be the preparation of a statement of basic postulates and standards on which all other pronouncements would be based."
The consideration, then, of detailed matters, such as those covered by the present accounting research bulletins, should be undertaken in relation to the postulates and broad principles previously expressed.