Accounting research bulletins: Meaning, Criticisms & Real-World Uses

What Are Accounting Research Bulletins?

Accounting Research Bulletins (ARBs) were a series of publications issued by the Committee on Accounting Procedure (CAP) of the American Institute of Certified Public Accountants (AICPA) between 1939 and 1959. These bulletins provided guidance and recommendations on various accounting principles and practices within the broader field of financial accounting. The primary purpose of the Accounting Research Bulletins was to improve accounting practices and foster consistency and comparability in financial statements across different entities. The content of these bulletins aimed to address specific accounting problems and offer authoritative advice to accountants and auditors.

History and Origin

The genesis of Accounting Research Bulletins lies in the need for standardized financial reporting in the United States, particularly following the Great Depression and the establishment of the Securities and Exchange Commission (SEC) in 1934 to oversee the securities industry and protect investors.¹⁷, ¹⁸, ¹⁹ Prior to this period, accounting practices were less uniform, leading to inconsistencies in how companies presented their financial information.¹⁶

In 1939, the American Institute of Accountants (which later became the American Institute of Certified Public Accountants) formed the Committee on Accounting Procedure (CAP) to systematically address various accounting issues.¹⁴, ¹⁵ The CAP subsequently began issuing the Accounting Research Bulletins, with the first bulletin published in September 1939.¹³ Over its two decades of operation, the CAP issued a total of 51 Accounting Research Bulletins, covering a wide array of topics, including revenue recognition, depreciation, and inventory valuation.¹¹, ¹² These bulletins were significant in shaping the early development of accounting principles in the U.S. and served as foundational documents for many subsequent accounting standards. The full text of these historical documents can be accessed for reference.¹⁰

Key Takeaways

Accounting Research Bulletins (ARBs) were guidance documents issued by the Committee on Accounting Procedure (CAP) from 1939 to 1959.
The CAP was an early standard-setting body in the U.S., preceding the Accounting Principles Board (APB) and the Financial Accounting Standards Board (FASB).
ARBs aimed to provide interpretations and recommendations on accounting principles to improve consistency in financial reporting.
A total of 51 ARBs were issued, covering diverse accounting topics like inventory valuation and consolidations.
While influential, ARBs were criticized for their case-by-case approach and lack of a comprehensive conceptual framework, eventually leading to their supersession.

Interpreting the Accounting Research Bulletins

The Accounting Research Bulletins provided practical guidance for specific accounting situations, rather than a comprehensive theoretical framework. Each bulletin addressed a particular accounting problem, offering recommended practices. For instance, ARB No. 43, issued in 1953, was a significant restatement and revision that consolidated and updated many previously issued ARBs. It included chapters on topics such as inventory pricing, providing direction on valuation methods.⁹

While no longer authoritative, understanding the historical context of Accounting Research Bulletins helps in tracing the evolution of accounting standards. They offered insights into the prevailing accounting thought and challenges of their time, influencing the development of practices related to areas like contingencies and financial statement presentation.

Hypothetical Example

Consider a manufacturing company in the 1940s facing a complex issue regarding how to account for the depreciation of its newly acquired machinery. At the time, specific rules might have been inconsistent across different businesses. An Accounting Research Bulletin, such as ARB No. 20 on "Restatement and Revision of Accounting Research Bulletins (Chapter 9 – Depreciation)", might have provided guidance. The bulletin would offer recommendations on acceptable depreciation methods, such as the straight-line method or accelerated methods, and the principles for calculating useful life and salvage value. By following the recommendations in the Accounting Research Bulletins, the company would aim to present its financial data in a manner consistent with emerging best practices, promoting greater transparency and comparability in its balance sheet and income statement.

Practical Applications

While Accounting Research Bulletins are no longer the primary source of authoritative Generally Accepted Accounting Principles (GAAP), their historical significance is substantial. They laid the groundwork for modern accounting standards by addressing pressing issues in financial reporting during their active period. For instance, the principles outlined in ARBs concerning topics like consolidations and foreign exchange operations contributed to the development of subsequent, more formalized GAAP pronouncements.

Today, the authoritative source for U.S. GAAP is the Accounting Standards Codification (ASC), maintained by the Financial Accounting Standards Board (FASB). T⁶, ⁷, ⁸he ASC is a comprehensive, single source that consolidates various accounting literature, including many concepts originally touched upon in the Accounting Research Bulletins. T⁵he SEC continues to oversee the application of these standards to protect investors and maintain efficient markets.

⁴## Limitations and Criticisms

Despite their pioneering role, Accounting Research Bulletins faced several limitations and criticisms that ultimately led to their replacement. A primary criticism was their ad hoc, case-by-case approach. E³ach bulletin often addressed a specific problem as it arose, rather than being part of a comprehensive and coherent conceptual framework. This piecemeal approach meant that the ARBs sometimes lacked a unified set of underlying principles, potentially leading to inconsistencies or gaps when new issues emerged.

Furthermore, the Accounting Research Bulletins did not always carry sufficient binding authority over the AICPA's membership, which sometimes reduced their influence and compliance. This lack of enforceability contributed to a perceived need for a more robust and authoritative standard-setting body. The shift from the CAP to the Accounting Principles Board (APB) in 1959, and subsequently to the FASB in 1973, reflected a move towards a more structured and principle-based approach to establishing accounting standards. T¹, ²hese subsequent bodies aimed to develop a more systematic framework for auditing and financial reporting, addressing the critiques leveled against the earlier Accounting Research Bulletins.

Accounting Research Bulletins vs. Accounting Principles Board Opinions

Accounting Research Bulletins (ARBs) and Accounting Principles Board Opinions (APBOs) represent two distinct phases in the evolution of accounting standard-setting in the United States. Accounting Research Bulletins were issued by the Committee on Accounting Procedure (CAP) from 1939 to 1959, focusing on providing guidance for specific accounting issues. They were often criticized for their lack of a cohesive framework and limited enforcement power.

Following the dissolution of the CAP in 1959, the Accounting Principles Board (APB) was established by the AICPA to assume the role of setting accounting standards. The APB then issued Accounting Principles Board Opinions (APBOs) as its primary form of authoritative guidance. While the APB aimed for a more structured approach than the CAP, it too eventually faced criticism for its slow pace and perceived lack of independence, leading to its replacement by the Financial Accounting Standards Board (FASB) in 1973. Both ARBs and APBOs have since been superseded by the Accounting Standards Codification, which is the current single source of U.S. GAAP.

FAQs

Who issued Accounting Research Bulletins?

Accounting Research Bulletins were issued by the Committee on Accounting Procedure (CAP), a body formed by the American Institute of Certified Public Accountants.

Are Accounting Research Bulletins still used today?

No, Accounting Research Bulletins are no longer authoritative. They have been superseded by subsequent pronouncements, primarily those now codified in the Accounting Standards Codification (ASC), which serves as the single source of U.S. Generally Accepted Accounting Principles.

Why were Accounting Research Bulletins replaced?

The Accounting Research Bulletins were replaced due to criticisms regarding their piecemeal, case-by-case approach, which lacked a comprehensive and coherent framework. Additionally, they sometimes lacked the necessary authoritative weight to ensure consistent application across the accounting profession. This led to a need for more formalized standard-setting bodies like the Accounting Principles Board and later the Financial Accounting Standards Board.