Reviewed by John B. Sperry Virginia Commonwealth University
This reprint of a 1948 edition is one of a series of noteworthy his-torical publications within the Arno Press collection relating to “The Development of Contemporary Accounting Thought.” It contains a praiseworthy profile, properly deserved, of the author by Steve Zeff, As indicated by Zeff, De Paula was a man in advance of his time, He was a true pioneer, an intellectual, and a statesman. It is a book well worth reading. The book is organized into four parts: Account, ing Principles, Industrial Planning & Control, Miscellaneous (educa tion, fraud detection, trusts and government contracts), and Conclusions.
It is interesting to note that the author’s testimony before a legislative committee concerning accounting principles and disclosure occurred in May 1943 and 1944. That is, the end of World War II was foreseen and the need to improve corporate reporting was recognized. Further, the reader will be impressed with the reliance De Paula placed on accounting education in the United States along with American disclosures relating to holding companies; i.e., consolidated financial statements, and U. S. publications on financial planning and control in industry. He attributes his source of new ideas to wide reading of American literature. This effort occurred during the first two decades of this century. As one follows the chronology of dates, it becomes apparent that change, particularly drastic change, occurs very slowly. As in this country, acceptability, not fiat, is the cornerstone underlying the authority of accounting principles.
De Paula testified and wrote eloquently on the need to eliminate secret reserves. He correctly indicated, repetitively, that excess conservatism is misleading. He focused on the need for precise, uniform terminology, disclosure of fixed asset historical cost and accumulated depreciation (although he advocated separate recording of obsolescence), market value for securities held for investment, precise delineation of income tax expense (i.e., relate charge to fiscal period during which taxable income was earned), and consistency between periods.
Prior to the early 1940s, the balance sheet was regarded as the key statement. One cannot help but wonder if De Paula’s stress on the income statement wasn’t the stimulus for such change in Great Britain? He was eloquent and thoughtful in his essays. Some of his ideas are today’s research topics pursued by the Financial Accounting Standards Board. In reading his essays, the reader gains new insight into topics with which the profession has currently devoted much time; e.g., segment disclosure, equity method and consolidated financial statements, foreign currency translations and the need for formal, enunciated principles (i.e., conceptual framework). De Paula deplored the lack of an authoritative rule-making body, and one concludes that he would be an avid supporter of the Financial Accounting Standards Board.
In addition to his invaluable contribution to concepts, technique and the educational process, his book contains gems of eloquence and interesting tidbits of accounting history. For example, Chapter X, concerns the interpretation of accounts. His opening sen-tence is as follows:
It may be said that the interpretation of accounts is the art of making figures speak and figures speak to those who understand the language.
Also, Accountancy as a profession started in Scotland. The Society of Accountants in Edinburgh obtained its charter in 1854. His first several pages in Chapter XI on Accountancy in Commerce would serve as a stimulating handout to students in basic principles courses. The relevance of his ideas is impressive and would make for stimulating discussion in a graduate seminar.
This collection of De Paula’s essays, testimony, letters, and articles will foster an appreciation of current accounting issues relating to principles and disclosure. The parts relating to industry and commerce will furnish a number of useful distributions to beginning students in accounting. His comments are as applicable today as they were a half-century ago. This reviewer cannot help but believe that they would favorably influence the serious student into considering accounting as a major. The book is recommended reading for all accounting educators.
