editorial: theory and "intermediate" accounting

Editorial: Theory and "Intermediate" AccountingSource: The Accounting Review, Vol. 54, No. 3 (Jul., 1979), pp. 592-594Published by: American Accounting AssociationStable URL: http://www.jstor.org/stable/245984 .

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THE ACCOUNTING REVIEW Vol. LIV, No. 3 July 1979

EDITORIAL

Theory and "Intermediate"

Accounting

I am concerned about the "intermediate" financial accounting course. An accelera- tion in the issuance by standard-setting bodies of highly specific and definitive accounting pronouncements has burdened "intermediate" textbooks and "intermediate" courses with what has come to be called "legal accounting." In effect, the actions of professional standard-setters have transformed the "intermediate" course from a mixture of theory and practice to an undiluted indoctrination in the practices recommended in Opinions, Statements, Interpretations, Accounting Series Releases, Staff Accounting Bulletins, and Statements of Position.

What should be the role and function of the "intermediate" course in the accounting curriculum? It is time that the objectives and content of this offering be carefully reconsidered and redefined, and I think it would be helpful if the American Accounting Association or another sponsoring body would convene a conference on the subject.

Beginning in 1967, when the active period of the Accounting Principles Board may be said to have commenced, accounting pronouncements, in the United States at least, began to pour forth as never before. They began to address controversial questions, and, more frequently than not, their recommendations were arbitrary resolutions of problems whose answers were not known or knowable-especially without objectives or a body of guiding, coherent accounting theory. Beginning in 1972, the Securities and Exchange Commission joined the parade, and the Financial Accounting Standards Board and the AICPA's Accounting Standards Executive Committee have proven to be worthy successors to the APB. Consequently, a mountain of complex pronouncements stands where a molehill of fairly simplistic bulletins once stood. The challenge to the accounting teacher is to decide how the essential content of these professional recommendations should be conveyed to the student.

In these remarks, I confine myself to the task of educating the prospective accounting professional. Doubtless the question would be answered differently if one were concerned with educating the diverse users of financial reports. The case method of instruction might be proposed for this purpose.

To some considerable degree, the issue of what to do about "intermediate" accounting is confounded by discord over the relative weights to be assigned in the accounting curriculum to (1) preparing students to pass the Uniform CPA Examination and (2) preparing students for longer-term assignments in the profession. The profession has beyond any doubt been buffeted by change during the last decade. As it is more difficult now than ever before to be confident of the challenges which will face accounting professionals in the 1980s and 1990s, one wonders whether a curriculum that does

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little more than inculcate in students a sense of current practice will serve them well in future years. The CPA Examination typically tests one's understanding of extant practice, with, to be sure, some emphasis on existing controversies. But the Examina- tion is predominantly a gauge of the candidate's understanding of "what is."

Prior to the mid-1960s, the "what is" in accounting was so generally defined in pronouncements that it could be summarized quite comfortably in the curriculum while still allowing time, if such was the intent, to discuss theory. Moreover, many universities then offered credit courses in "CPA Review," which relieved some of the pressure on the "intermediate"-"advanced" sequence to cover everything there was. Today, the CPA coaching courses, offered in almost every major population center, have supplanted the CPA Review credit courses, and accounting education has moved closer toward legal education, which has long been complemented by post-graduate Bar review courses.

I am frankly concerned that accounting teachers have placed almost the entire burden of conveying the contents of the most controversial (and, frequently, the most complex) accounting pronouncements on the "intermediate" course-leases, pensions, income tax allocation, replacement cost/GPL accounting, revenue recognition, good- will, research and development, earnings per share, among others-that precious little time remains for acquainting students with a theory of the field which they are about to enter. How many accounting teachers can be found who would not confess that their "intermediate" course is bursting at the seams with technical pronouncements?

One reaction to this predicament has been to expand "intermediate" from three semester hours to four, or from one course to two (with equivalent actions taken by those on the quarter system). The result, however, is only that more pronouncements can be covered, and theory continues to be relegated to an optional seminar. And how many curricula contain such a seminar, even at the master's level? Typically, such seminars are offered in the final semester of the course of study, when many students are preoccupied with getting a job and preparing for the CPA Examination-neither of which mixes well with excursions into the world of theory.

Theory should come at the front, not only at the back of the curriculum. It should provide a framework within which students might endeavor to rationalize (if they can) and assess extant practice, and it should help them to be informed critics and inter- preters of exposure drafts and pronouncements yet to come-and for other kinds of change. For those who aspire to leadership roles in the profession, theory (and an appreciation of how to read the theory literature) should enable them to make wiser policy decisions. Theory in both the normative and positive senses should be taught as an integral (and early) part of the accounting curriculum, and it should draw not only on textual materials but also on articles from the literature.

I do not propose that so-called "legal accounting" should not be taught in university accounting curricula. I do, however, insist that instruction in "legal accounting" should not drive out instruction in the theory of one's field. And I contend that the trend in "intermediate" courses has de facto done just that in many American universities in the last decade.

Are students to be encouraged to believe that accounting has no theory worth learning, or that the only "theory" is the amalgam of authoritatively recommended practices (as of a given moment)?



594 The Accounting Review, July 1979

More than 25 years ago, Baxter [1953] warned that "recommendations on accounting theory" could ossify the discipline. He wrote [p. 410]:

[Such recommendations] are likely to weaken the education of accountants; the conversion of the subject into cut-and-dried rules, approved by authority and not to be lightly questioned, threatens to reduce its value as a subject of liberal education almost to nil.

On the content of the "intermediate" course, Mautz has written:

[N]o course in a college or university should be aimed at merely presenting a mass of factual detail or procedure for memorization by the student. Emphasis should be on reasoning and the development of a student's ability to think in terms of accounting ideas. This again suggests the importance of basic theory and the usefulness of a knowledge of the functions and limitations of accounting. To bury this desirable emphasis under a mass of factual legal and accounting detail would do little to advance a student's reasoning ability [Mautz, 1951, p. 243].

I was provoked to write this Editorial upon reading a review written by an Aus- tralian accounting academic of a recent edition of a well-known American "intermediate" textbook. After contrasting the American approach of dwelling on existing practice with the Australian preference for concentrating on theoretical structure, the reviewer somewhat cynically writes,

To their credit, the present authors have dared to differ [with the authoritative pronouncements] on some issues, but the impression remains that teachers will concentrate on working through the text and that the spirit of inquiry and debate expected in tertiary institutions may be missing from intermediate accounting. There is little time for free debate and, anyway, the issues appear to have been resolved [Martin, 1978, p. 81].

The reviewer had taught an earlier edition of the textbook in an American university. I am encouraged that some writers are thinking constructively about this problem.

Wilson [1979] presents an interesting proposal in the Education Research section of the April issue.

Although my specific concern here is with the "intermediate" accounting course, any sound solution must have implications for the entire financial accounting curriculum. The answer to this curriculum question must not be allowed to be dictated by an ineluctable trend in the standard-setting process. Educators must once again become masters in their own households.

REFERENCES

Baxter, W. T., "Recommendations on Accounting Theory," The Accountant (October 10th, 1953), pp. 405-410.

Martin, Carrick A., Review of Intermediate Accounting, 4th Ed., by W. B. Meigs, A. N. Mosich and C. E. Johnson, in Accounting Education (November, 1978), pp. 80-82.

Mautz, R. K., "The Intermediate Course in Accounting," THE ACCOUNTING REVIEW (April, 1951), pp. 239-244.

Wilson, David A., "On the Pedagogy of Financial Accounting," THE ACCOUNTING REVIEW (April, 1979), pp. 396-401.

STEPHEN A. ZEFF Editor



editorial: theory and "intermediate" accounting

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