ABSTRACT
This chapter explores that accounting principles can and should be defined to provide substantial comparability between the financial statements of different corporations in a provocative challenge to the accounting profession. The director's response that depreciation charged to income is intended to be an amortization of original cost holds to an outmoded accounting convention. The real reason for charging depreciation to operations is to determine the true net income after a full provision for the fair value of the capital consumed in creating that income. The American Institute's Research Bulletin 44 (ARB 44), as revised, carries the dissents of some members of the accounting procedure committee who are opposed to deferred tax accounting. The chapter explores that depreciation provisions are not intended to provide funds to cover replacement of the plant. The public's problems with accounting are just plain everyday 'bread and butter' economics.
