Historical Development Of Financial Accounting Theory

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To understand the fair value accounting concept, an understanding of the foundation of accounting is where it is today is needed. This information provides a guideline of how the first conceptual ideas of accounting first began and changed overtime to accommodate the ever increasing changes with investment options along with lobbying efforts of individuals. The FASB’s Statement of Financial Accounting Concepts (SFAC) No. 8 indicates that the primary purpose of financial reporting is to provide financial information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors in making decisions about providing resources to the entity (Schroeder, Clark, & Cathey, 2014 p. 184). With…show more content…
Philadelphia opened the first stock market in 1790 which was later followed by the New York Stock Exchange in 1792 with Bank of New York being the first list stock. With incomes increasing, individuals had disposal income to start investing with. As America went west, railroad stocks became hot commodities which caused investors to invest heavily in. By the 1900’s accounting organizations started to increase and strive for the recognition of professionalism. During this time, University’s started to offer classes on accounting for individuals looking for a business career in accounting. The accounting profession’s turning point came with the stock market crashed in 1929. Following this event the Securities and Exchange commission was created to administer various securities acts and to prescribe accounting principles and reporting practices (Schroeder, et. al, 2014, p. 6). Subsequently, the American Institute of Certified Public Accountants (AICPA) was given the opportunity to create accounting standards for companies to follow. But dissidence cropped up as disagreements arose with how members would be selected and the timeframe it took to bring the potential regulations to the public. By 1973, the Financial Accounting Standards Board (FASB) was designated as the organization within the private sector for establishing standards of financial accounting that
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