ACCOUNTING PRINCIPLES: COMPETING VIEWS
There are two competing views of accounting principles: one maintaining that accounting principles are based on what is generally done in practice and the other holding that a foundation of fundamental premises ("concepts") necessarily underlies and determines sound practice (Storey, 1998, p. 1).
This research examines the merits of the two competing views of the philosophical basis for accounting principles as delineated in the above quotation. With respect to the above quotation, its author, Reed Storey (1998), a former senior technical advisor at the Financial Accounting Standards Board (FASB), added that the latter view (that accounting principles are based on "a foundation of fundamental premises" that both underlie and determine "sound practice") "has been the source of significant advances in accounting theory for more than 20 years and has affected financial accounting standards and practice through the FASB's conceptual framework" (p. 1). Having made that assessment, however, he went on to state that accounting practice, nevertheless, "has continued to be dominated by the former view" (that accounting principles "are based on what is generally done in practice") in the United States (Storey, 1998, p. 1).
Based on the dichotomy described above, one can understand that the competing views of the philosophical basis for accounting principles create a contentious issue when the discussion is restricted to the accounting environment in the United States. In the era of the globalization of business activity that exists in the late-1990s, a phenomenon that quite likely will continue to accelerate in the early decades of the new millennium, however, restricting the discussion of this issue to the accounting environment in the United States is unrealistic.
First, whether accounting principles are based on practice or provide the fundamental premises upon which practice is based, suc...