ABSTRACT
This chapter outlines the history of financial accounting theory (FAT) in the English-speaking world. It discusses the term theory means any linguistic statement of belief about the function of financial accounting, expressed in logical argument, and intended to rationalise, explain, or predict financial accounting practice. Most statements of FAT implicitly or explicitly acknowledge the pragmatic and subjective restriction and, as later sections of this chapter demonstrate, anomalies and problems in corporate financial reporting are typical triggers for theoretical contributions to the financial accounting literature. The historical analyses relating to FAT in the following sections cover the period from the end of the nineteenth century to the present day. The following historical review is divided into three approximate time periods. However, it influenced the current cost accounting debate of the 1970s in its argument for mixed values and the separation of operating and holding income.
