1992 ACCOUNTING HALL OF FAME INDUCTION: DAVID SOLOMONS

INTRODUCTION
by
Stephen A. Zeff

Herbert S. Autrey Professor
Jones Graduate School of Administration
Rice University

David Solomons has brought a kind of sanity to the accounting literature and to policy deliberations.

While always faithful to his principles, which he expounds with admirable clarity and persuasiveness, he has consistently had regard for their operational feasibility.

The historical evolution of ideas, policies and practices has always occupied an important place in David’s writings. Moreover, few authors can match the ease with which he draws out the essence of ideas and experiences from different national cultures.

He is a master craftsman of the English language, with a penchant for argument by metaphor. “Accounting is financial mapmaking” has been his metaphor of choice.

David provides the reader with a broad perspective for whatever he is discussing, and the reader is invited to follow his inexorable logic in full knowledge of all that he considers relevant to the debate. In his writings, he is, above all, a scholar and a teacher. Even if one does not accept his conclusions and recommendations, he/she nonetheless acquires a precious insight into the issues, the arguments, and the forces driving the controversy. There is always wisdom in what David writes.

David’s academic career has been at three universities: the London School of Economics (LSE), from 1946 to 1955; the University of Bristol, from 1955 to 1959; and the Wharton School of the University of Pennsylvania from 1959 to his retirement in 1983.

His earliest work dealt with management accounting, accounting theory, and accounting education. He was much influenced by Ronald S. Edwards, a LSE industrial economist who had a large interest in accounting. In the late 1930s, Edwards had written a series of memorable articles in The Accountant, in which he dealt with costing history and, in a 13part article written in 1938, produced perhaps the first treatise on asset valuation and income determination in the British literature, in which he defended the increasednetworth concept of income, taking into account Bonbright’s notion of “value to the owner.” David has called Edwards “one of my principal mentors during my LSE period.

David’s first major article, in 1953, was a pioneering essay on costing history, and during the 1950s he revised Sidney Alexander’s famous tract, “Income Measurement in a Dynamic Economy,” which, like Edwards’s work, was an argument for the increasednetworth concept of income. However, David’s pivotal works, in my view, came after his move to the U.S. in 1959.

In 1961, David concluded, ruefully, that it was not operationally feasible to isolate changes in expectations from Alexander’s “economic income,” thus rendering it of little use as a satisfactory measure of enterprise performance. He thereupon issued his famous prediction that “so far as the history of accounting is concerned, the next twentyfive years may subsequently be seen to have been the twilight of income measurement.” Twentyfive years later, he acknowledged that his prediction had not been fulfilled, and that perhaps his forte was not as a seer, In 1966, he published a major paper on Bonbright’s “value to the owner” formulation for valuing property, and gave it impetus in the debates over current value accounting by restating it in an inequality notation. David’s paper, which was published in the second edition of Morton Backer’s Modern Accounting Theory, directly or indirectly influenced the Sandilands Committee, the FASB, and the standardsetting bodies in Australia and New Zealand, all of which, in one form or another, embraced “value to the owner” (also known as “value to the business” or “deprival value”) in their dicta on current cost accounting issued during the 1970s.

In 1965, at the request of the Financial Executives Research Foundation, David wrote his first book, Divisional Performance: Measurement and Control, in which he reported on a survey of 25 major companies and presented his own recommendations on how best to evaluate and control decentralized operations. It was a pathbreaking study, and it earned him the AICPA’s Notable Contribution to Accounting Literature Award.

On accounting education, David argued in his inaugural address at the University of Bristol, in 1955, that all entrants into the accounting profession should be required to take three years of university study in accounting, economics and law—a radical view in an era when most entrants came straight into the profession from high school, and took evening courses in correspondence schools! He has always championed a large role for universities in the preparation of entrants into the profession. When, in 1961, the Parker Committee on Education and Training reported to the English Institute that the status quo, with only minor changes, should be preserved in preparing prospective Chartered Accountants, he wrote a scathing criticism of the report in the Institute’s journal, which the late Eddie Stamp has called “one of the most critical [articles] ever to appear in the literature of the British profession”.

However, in the 1970s, David emerged from the academic literature to become an architect of change. In the waning days of the Accounting Principles Board, during the fractious debate over business combinations and intangibles, AAA President Don Edwards invited David to chair a blueribbon committee to recommend whether a change in the standardsetting system was needed, and if so, how to go about it. The very existence of such a committee caused consternation within the AICPA, which saw itself as the sole guardian of accounting principles, and once David’s committee had reported, Don was asked to nominate an AAA representative on the newly formed Wheat Study, which had been charged by the Institute to conduct a fullscale enquiry into standard setting. Don nominated David, and David eventually became an influential member of the Wheat Study and, in fact, was given the task of writing the first draft of its report. As we know, that report led to the establishment of the FASB. Then, in 1978, he was a consultant to the special Institute committee looking into a restructuring of the Auditing Standards Executive Committee, which led to the formation of the Auditing Standards Board.

As is well known, David was the principal draftsman of the FASB’s Concepts Statement No. 2 on qualitative characteristics, which was adopted or adapted by standard setters in Canada (both the CICA and the CGA), the UK, Australia and New Zealand in the formulation of their own conceptual frameworks.

In 1986, David wrote his valedictory on standard setting and the conceptual framework, a 261page book entitled Making Accounting Policy: The Quest for Credibility in Financial Reporting, which is a model of thoroughness, careful scholarship, and persuasive writing in a field that has been marked by intemperate advocacy and bombast. He argued in favor of Current Cost Constant Purchasing Power Accounting with financial capital maintenance. Finally, in 1989, at the request of the Research Board of the English Institute, he drafted a concise conceptual framework for consideration by the UK’s Accounting Standards Committee.

In accounting education, David was invited by the six accountancy bodies in the British Isles to do a major longrange study of accounting education and training, which he completed in 1974. That some of its farreaching recommendations are only now seeming to find favor in the UK has given “longrange” a new meaning. In the 1970s and 1980s, he also advised the Canadians on their Uniform Final Examination for accounting entrants.

In sum, David has left a large and salutary mark on the literature, but he has been equally active as a highly soughtafter consultant to policy makers. Few academics can be said to have played both roles so well.