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History of Neutrality in American Accounting (1930-2018)

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  • Gregory Heem

    (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur)

  • Charles Richard Baker

Abstract

Neutrality has been a fundamental qualitative characteristic in US GAAP for many years. Neutrality refers to the principle that financial statements should be free from bias, i.e., they must not serve a particular interest or be designed to achieve a predetermined result. A historical analysis of neutrality provides a better understanding of the concept. The idea of neutrality was the result of reflections carried out in the wake of the 1929 crisis and the recognition that accounting numbers were not neutral but manipulated by business leaders to their advantage. Neutrality was re-emphasized in 1966 with the notion of "absence of bias" in the AAA's ASOBAT report and was then formalized in the AICPA's APB 4 in 1970. Our historical work provides a review of the evolution of neturality which gradually emerged in American accounting standards and then in IFRS. It also sheds light on the disagreements and debates among academics such as R.J. Chambers, D. Solomons, and M. Moonitz.

Suggested Citation

  • Gregory Heem & Charles Richard Baker, 2024. "History of Neutrality in American Accounting (1930-2018)," Post-Print halshs-04695221, HAL.
    • Handle: RePEc:hal:journl:halshs-04695221
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    Keywords

    Neutrality; Prudence; US GAAP;
    All these keywords.

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