Reviewed by Dale Buckmaster University of Delaware
Fool’s Profits is a series of articles that were originally published in Barron’s during the period, August through November, 1939, plus three appendixes containing sections of government documents re¬lating to the acceptability of LIFO for income tax purposes. Cotter indicated, “this volume is not written primarily for the accountant, but rather to the corporate executive, particularly those concerned with finances, and directors as well as students of corporate finance and business generally” (vii). The book represents a crusade by Cotter to get corporations to adopt LIFO rather than FIFO.
Cotter’s advocacy of LIFO arises primarily from the belief that it will result in smoothing income. He has no real concern for bal¬ance sheet valuation of inventory. His approach to this advocacy is to provide examples of the effects on profits of industries and com¬panies within industries over periods of five to twenty years. In ad¬dition, he provides as examples of how smoothing is obtained, some simple numerical computations. Peculiarly, he is so enthused about LIFO that he continually refers to it as “inventory control.”
The book might have had considerable impact at the time of its publication and it might have been an important book at that time; however, it is not a book that I would recommend be high on one’s reading list. I found the costs of reading the book far exceeded any insight into accounting thought at that particular time and ac¬counting thought during the second quarter of the twentieth century is a subject in which I am interested. Perhaps, one of the reasons for my negative attitude towards this book is that I recently read Devine’s book on accounting for inventories [1942]. The Devine book which was published about the same time as Fool’s Profits was written for accountants and, even though it is somewhat boring at times, it provides a great deal of insight into the origins of LIFO and accounting thought of the period.
BIBLIOGRAPHY
Devine, Thomas. Inventory Valuation and Periodic Income. New York: The Ronald Press Company, 1942. Reprint
