Reviewed by Martha K. Farmer Augusta College

Charles William Lamden completed The Securities and Exchange Commission: A Case Study in the Use of Accounting as an Instrument of Public Policy in 1949 as a part of his requirements for the degree of Doctor of Philosophy. As the title indicates Lamden intended to discuss the use of accounting in public policy. While he referred to the active and passive use of accounting he did not present a convincing argument for or against the use of accounting as an instrument of public policy. Neither did he demonstrate very well how it has been used in this way However, Lamden did present an excellent history of the early issues confronted by the SEC and the accounting profession.

This book includes eleven chapters, most of which relate to one of three areas:

1. Early standard-setting process with and without the SEC.
2. Major issues confronting the profession during the late 1930s and the 1940s.
3. Significant areas of controversy on which the profession and the SEC sometimes disagreed.

Chapters related to the first area remind the reader that the profession has been and continues to be self-regulating and frequently takes the initiative in problem solving and standard setting. Many of the major issues discussed by Lamden continue to be major issues today and controversies between the profession and the SEC may not have been resolved.
As one progresses through The Securities and Exchange Commission he is alternately impressed by the tremendous progress and the lack of progress by the accounting profession. Within three pages, both conclusions can be drawn. In Chapter VII, Lamden reviewed the SEC requirements for financial statement presentation.

When discussing the requirements for the presentation of “surplus” he explained:
If a separation can be made the amount of the paid-in surplus and revaluation surplus should be shown separately. If the separation cannot be made, it must be explained that the capital surplus is composed of paid-in, revaluation, or other types of surplus if such is the case. (p. 164)
Today this issue is solved. Not only has the profession eliminated the use of the word surplus, but it has also required that this “surplus” be properly labeled and separately reported according to source.

A short time later, Lamden discussed the concept of writing up assets to current appraised values. He explained:

The Commission has also expressed itself as to the per-missibility of increasing the surplus by appraising the assets on the balance sheet. Such appraisals are permitted if good reason can be shown for them, but the surplus arising from such revaluations must be stated separately and not included with the capital or earned surplus … (p. 166)
Current efforts to develop current value accounting measures some-times confuse historical retained earnings and the effects of re-valuations. The reader wonders about the pace and direction of progress when he is reminded of these 1940 issues and then he compares them to the partial solutions of today.

Lamden’s book is replete with examples of this type. The modern day reader is never quite sure whether the accounting profession has progressed in its search for accounting principles or whether it has gone in circles. Sometimes it appears that the movement has been in the direction of short side trips. As one reads Lamden, he is reminded of the old adage that “the more things change, the more alike they are.”

Because of this enlightening perspective of viewing accounting standard setting in light of its beginning and its current status, I highly recommend that anyone interested in the standard-setting process or progress therein read Lamden’s The Securities and Ex-change Commission.