Accounting History in a Nutshell

Origins of Double Entry Accounting are Unknown

1300s A.D. crusades opened the Middle East and Mediterranean trade routes 
Venice and Genoa became venture trading centers for commerce 1296 A.D. Fini Ledgers in Florence 
1340 City of Massri Treasurers Accounts are in double entry form. 
1458 Luca Pacioli's Summa de Arithmetica Geometria Proportionalita (A Review of Arithmetic, Geometry and Proportions) This is noted as the first book on algebra. Although it is the first documented source of double entry bookkeeping, double entry accounting is used primarily as an illustration of algebraic equations. 

Going Concern and Accrual Accounting Evolved in the 1500s

Venture accounting over the life of a venture with interim statements evolved in The Netherlands 
1673 Code of Commerce in France requires biannual balance sheet reporting 
Charge and Discharge Agency Responsibility and Stewardship Accounting in English trust accounting 

Limited liability Corporations (divorced professional management from ownership shares)

1555 A.D. Russia Company 
1600 A.D. East India Company 
1670 A.D. Hudson's Bay Company 
England's Joint Stock Companies Act of 1844 required depreciation accounting for railroads, mining, and manufacturing (although the concept of depreciation dates back to Roman times). 

Speculation Fever
Fraud and corruption festered and grew with the trading of joint stock, especially after 1600 A.D. The South Seas Company scandal (reporting stock sales as income and paying dividends out of capital) led to England's
Bubble Act in 1720 A.D. that focused on misleading accounting practices that helped managers rip off investors, especially by crediting stock sales to income.

Laissez-Faire Accounting survived endless debates and scandals until the Great Depression in 1933

Much of the debate focused on capital maintenance (e.g., failure to charge off depreciation and failure to provide for
replacement of operating assets), but governments did not legally impose auditing requirements and serious GAAP until
the U.S. securities laws in the early 1930s. Accountants were vocal in reform movements, but governments were slow
to react with legislation and courts failed to establish consistent GAAP. 
Creation of the SEC in an effort to regain public trust in financial reporting and equity investing. 
Many firms did have independent audits and conformed to the best GAAP traditions of the day (thereby giving some
evidence that Agency Theory works sometimes.) Agency theory hypothesizes that it is in the best interest of
management to contract for protection of investors and avoid scandalous asymmetries of information. 

After 1933, the AICPA and the SEC seriously attempted to generate accounting standards, enforce accounting standards, and
provide academic justification for promulgated standards.

ASRs of the SEC 
In a 3-2 vote the SEC followed George O. May's efforts to mandate external audits of securities traded across state
lines in the U.S. 
1939-1959 A.D.: Accounting standards were generated by the AICPA's Committee on Accounting Procedure (CAP)
that issued Accounting Research Bulletins (51 ARBs) --- but the tendency was to overlook controversial issues such as
off-balance sheet financing, public disclosure of management forecasts, price-level accounting, current cost accounting,
and exit value accounting. Controversial items avoided by the CAP included management compensation accounting,
pension accounting, post-employment benefits accounting, and off balance sheet financing (OBSF). The CAP did very
little to restrain diversity of reporting. 
1960-1972 A.D.: Accounting standards in the U.S. were generated by the AICPA's Accounting Principles Board
(APB) that had more members than the CAP and a mandate to attack more controversial reporting issues. The APB
attacked some controversial issues but often failed to resolve their own disputes on such issues as pooling versus
purchase accounting for mergers. 
1972-???? A.D. Accounting standards in the U.S. were, and still are, being generated by the Financial Accounting
Standards Board (FASB) that has seven members, including required members from industry, academe, and financial
analysts in addition to members from public accountancy. FASB members must divorce themselves from previous
income ties and work full time for the FASB. The formation of the FASB was a desperation move by CPA's to stave
off threatened takeover of accounting standards by the Federal Government (there were the Moss and Metcalf bills to
do just that under pending legislation in the U.S. House and Senate). Unlike the CAP and APB, the FASB has a
full-time research staff and has issued highly controversial standards forcing firms to abide by pension accounting rules,
capitalization of many leases, and booking of many previous OBSF items (capital leases, pensions, post-employment
benefits, income tax accounting, derivative financial instruments, pooling accounting, etc.). The road has been long and
hard on some other issues where attempts to issue new standards (e.g., expensing of dry holes in oil and gas accounting
and booking of employee stock options) have been thwarted by highly-publicized political pressuring by corporations. 

The FASB's website is at http://www.rutgers.edu/Accounting/raw/fasb/ 

The FASB added Concepts and Standards at an unprecedented rate. 
FASB standards have become increasingly complex and cause a great deal of confusion among both
preparers and users of financial statements. The most dramatic example is the almost-incomprehensible
FAS 133 on Accounting for Derivative Instruments. In fairness, however, it should be noted that industry
has brought on a lot of its own troubles with almost-incomprehensible financing and employment contracts
(many of which are designed for the main purpose of getting around having to book and/or disclose
expenses and debt). 
The FASB has focused much more on the balance sheet than on the income statement. Over one third of
the standards deal with industry OBSF schemes. 
The FASB does take costs into consideration as well as benefits of its accounting standards. For example,
after studying investor use of FAS 33 requiring supplemental statements on price-level adjusted statements
and current cost statements, the FASB rescinded FAS 133. 
The FASB also issued a costly and controversial set of Accounting Concepts. After some dormancy, the
FASB is once again adding to these concepts with its first new concepts statement in over 16 years
(Present Value Based Measurements and Fair Value). 
The future of the FASB and all national standard setters is cloudy due to the globalization of business and increasing needs for
international standards. 

International Accounting Standards Committee
The primary body for setting international standards is the International Accounting Standards
Committee (IASC) having a homepage at http://www.iasc.org.uk/ For a brief review of its history and the history of its
standards, I recommend going to http://www.trinity.edu/rjensen/acct5341/speakers/pacter.htm#003.04.

In the early years of its existence, the IASC tended to avoid controversial issues and there was nothing to back up its standards
(except in the U.S. where lawyers will use almost anything to support litigation brought by investors against corporations). 

Times are changing at the IASC. It has been restructured and is getting a much greater budget for accounting research. Most
importantly, IASC standards are becoming the standards required by large international stock exchanges (IOSCO)