Alternative financial statement reporting practices

Alternative financial statement reporting practices emerged because of their decentralized development (see Chapter 10). It became conventional wisdom that investment and credit opportunities of companies using the alternative financial statement reporting practices could be meaningfully compared if and only if the alternatives were eliminated. (In spite of the conventional wisdom, eliminating the alternatives wouldn’t be sufficient to lead to comparability, as discussed in Chapter 3.)

Financial reporting standard-setting was started because of that concern:

Since its organization [in 1887] the American Institute of Accountants [now the AICPA], aware of divergences in accounting procedures and of an increasing interest by the public in financial reporting, has given consideration to problems raised by these divergences. Its studies led it, in 1932, to make certain recommendations to the New York Stock Exchange which were adopted by the Institute in 1934. Further consideration developed into a program of research and the publication of opinions, beginning in 1938, in a series of Accounting Research Bulletins.