F. R. M. de PAULA
By Stephen A. Zeff Tulane University
Frederic Rudolf Mackley de Paula was a man in advance of his time. Almost five decades prior to the publication of the Solomons Report, which is now being studied by the accounting profession in the United Kingdom and Ireland, de Paula argued for a partner-ship between the universities and the accountancy bodies. In the 1930s, still a period in which secrecy dominated the disclosure Practices of U.K. companies, de Paula, as financial controller of a large British company, popularized the use of consolidated financial statements and pioneered in more informative reporting. In testi-mony before the Cohen Committee on Company Law Amendment in 1944, and as a member and chairman of an influential committee of the Institute of Chartered Accountants in England and Wales in the 1940s, de Paula played an important role in the implementation of several notable reforms in corporate financial reporting.
F. R. M. de Paula was born in 1882. Upon completing his articles and passing the intermediate and final examinations of the English Institute with honors, he was admitted as an Associate in February, 1906. He became a Fellow of the Institute in 1915. From 1909 until the outbreak of the World War, he was engaged in the practice of public accounting. During the War, he occupied a succession of administrative posts in Government service, concluding with a tour of duty in France. He resumed the practice of public accounting following the war, and joined the staff of the London School of Economics, In 1924, he was named Reader in Accounting and Business Organization, and in 1926, upon the retirement of Professor L. R. Dicksee, de Paula succeeded to the Sir Ernest Cassel Chair of Accountancy and Business Methods. He continued in the practice of public accounting and as occupant of the Chair until the end of 1929, when he was appointed Controller of Finance of Dunlop Rubber Company, Limited.
Shortly before World War II, he took leave from Dunlop for a period of service in the War Office. He left Dunlop in December, 1941, to become vice chairman and joint managing director of Harding, Tilton & Hartley Ltd., from which he retired in March, 1945. He served as a director of a number of companies and was an officer of the Federation of British Industries (today part of the Confederation of British Industry) and of the British Institute of Management. During the 1930s and 1940s de Paula Contributed articles to The Accountant, The Economist, and other journals, and gave frequent lectures to professional societies. A collection of his most important writings and addresses were published in Develop-ments in Accounting (Pitman, 1948), which has become a Standard work on the subject, now in its thirteenth edition.
De Paula began to take an interest in reform in the 1920s. In a pair of letters to The Accountant in 1926 and 1928, de Paula re-gretted that the accounting profession had taken so little interest in the academic study of accountancy. His proposal that the five years of training of an articled clerk be divided evenly between practical experience and whole-time University study might well have shocked the conservative leaders Of the English accountancy profession, who seemed to look upon the universities as an altogether alien force. De Paula fashioned an eloquent argument for the importance of academic study and research to the future of the profession, yet almost 50 years later it would appear that the English profession had not accepted de Paula’s thesis.
During the 1920s, his time divided between accounting practice and university lecturing, de Paula began to read widely in the American literature on new ideas in the presentation of accounts. “These attracted me greatly,” he later wrote, “and I grafted many of them into my teaching, and in the year 1929 I persuaded the board of a public company, of which I was the auditor, to present its accounts in accordance with these new ideas.” As chief accounting officer of Dunlop Rubber, he continued his crusade. In Dunlop’s 1929 accounts, issued in 1930, assets and liabilities were grouped into current and noncurrent categories, rather than in the legalistic mode adopted by virtually all other companies. Proposed dividends were incorporated in the balance sheet, and dividends were shown net of income tax. It has been the almost universal practice for companies not to reflect in the balance sheet the dividends which the directors had proposed and were to be acted upon at the annual general meeting.
In order that shareholders could appreciate the effect of their ratification of the directors’ action, de Paula believed that the proposed dividends should be shown in the balance sheet submitted at the annual meeting. In the 1931 annual report, Dunlop expanded its directors’ report to include a review and explanation of the year’s accounting results—a commentary not then provided by British companies. The 1931 year-end balance sheet contained, perhaps for the first time in Britain, comparative figures for 1930, and all the amounts in the financial statements were shown in even pounds, omitting the shillings and pence. Dunlop’s 1933 accounts attracted the greatest attention. In that year, the company issued both consolidated and parent-company financial statements. No law required the publication of consolidated accounts, and few companies had ever done so in Britain. Through his company’s 1933 accounts, de Paula launched a campaign to gain acceptance for this form of reporting. This series of innovations in the Dunlop accounts was acclaimed in the pages of The Economist and The Accountant, both of which had been criticizing companies for their uninformative reports to shareholders.
In 1941, members employed in industry and commerce (“non-Practicing members”) of the English Institute sought representation on the Institute’s General Council, which had until then been com-Posed solely of members in practice. The following year, compromise was reached by which the General Council created a Taxation and Financial Relations Committee made up of practicing and nonpracticing members. It was the first English Institute committee with non-practicing representatives. The Committee promptly requested authority from the General Council to draft Recommendations on Accounting Principles, and the permission was shortly given. De Paula was the Committee’s first Vice-Chairman and was Chairman between 1943 and 1945. During the Committee’s first three years, a time when a new Companies Act was in the making, the Committee, with de Paula as a leader, prepared several drafts of recommendations which, once approved by the General Council, were favorably received by the Cohen Committee on Company Law Amendment. A number of the Recommendations dealt with subjects on which de Paula had been advocating improvement for several years. Although no Recommendation appeared on the subject of consolidated accounts, de Paula ably argued for this reform in his testimony before the Cohen Committee. Others, including the London Stock Exchange, had joined in support of consolidated statements, but de Paula had been one of the staunchest proponents. In the end, the Cohen Committee reported in favor of group accounts, and they were required for the first time in the Companies Act, 1947.
In 1943, de Paula was selected as the first non-practicing repre-sentative on the Institute’s General Council, reflecting the esteem in which he was held by the practicing and non-practicing members alike. He remained on the General Council until his retirement in January, 1950.
De Paula was a forward-thinking member of the profession who rendered valuable service in private practice, government, industry, higher education, in the councils Of the Institute, and as an author. Any assessment of his career must conclude with the judgment that de Paula had a considerable impact on the pace and scope of the transition of published accounts from mere legal documents to informative reports to shareholders.
(Vol. 1, No. 4, p. 6, 1974)
