Bob Jensen's Threads on Accounting, Business, Economic, and Related History

Bob Jensen at Trinity University

If one were writing a history of the American capital market, it is 
a fair bet that the single most important innovation shaping that 
market was the idea of generally accepted accounting principles.
Lawrence Summers, President of Harvard University and former Secretary of Treasury

The purpose of this document is to maintain some threads on items of accounting and finance history.  Virtually all of these threads were taken from my New Bookmarks Archives at http://www.trinity.edu/rjensen/bookurl.htm 

20^th Century

History of the founder of Arthur Andersen 

Prior to the 20^th Century

Directories and References

Threads on Accounting for Derivative Financial Instruments
http://www.trinity.edu/rjensen/caseans/000index.htm

The Saga of Auditor Professionalism and Auditor Independence 
http://www.trinity.edu/rjensen/fraud.htm#Professionalism 

Bob Jensen's Threads on Accounting Fraud, Forensic Accounting, Securities Fraud, and White Collar Crime http://www.trinity.edu/rjensen/fraud.htm 

What's Right and What's Wrong With Special Purpose Entities (SPEs) http://www.trinity.edu/rjensen//theory/00overview/speOverview.htm 

Bob Jensen's Threads on Accounting Theory 
http://www.trinity.edu/rjensen/theory.htm 

Bob Jensen's Threads on Return on Business Valuation, Business Combinations, 
Investment (ROI), and Pro Forma Financial Reporting
http://www.trinity.edu/rjensen/roi.htm

20^th Century

Hello Yogamalar,

The best two sources are quite old and will not be on the Web.

I suggest that you begin with one of the most famous deductive monographs in accounting history (it may no longer be in print, but nearly all colleges will have copies in the library). It is An Introduction to Corporate Accounting Standards by W.A. Paton and A.C. Littleton (American Accounting Association, Monograph No. 3, 1940)

The other works are AICPA ARS Studies 1 and 3 by  by Moonitz and Sprouse and Moonitz --- http://www.wku.edu/~halljo/attempts.html 

You might also take a look at Baxter's lecture at http://newman.baruch.cuny.edu/digital/saxe/saxe_1978/baxter_79.htm 

I discuss these topics at http://www.trinity.edu/rjensen/acct5341/theory/00overview/theory01.htm 

Bob Jensen

Sir, 

I'm a student of a university and I used go through your web pages which help me giving information about my studies. I'm so happy to have a web page which students can access it and clear their doubts..

I just want a help from you sir I studying accounting and finance final year.  I'm looking for deductive approach theory in accounting practice and how it's contributed to the development of existing accounting practice in UK. It should focus on strength, weakness and limitations of the theory in current frame work practice.

I hope you will be giving me a explanation and some references...

thanky ou.. 
from sbesh.

History and Current Status of the IASC (International Accounting Standards Committee) (A Slide Show)
"Financial Reporting in the New Millennium," by Paul Pacter, http://www.iasc.org.uk/docs/overview.pdf 
In 2001, the name was changed to the International Accounting Standards Board (IASB)

For news and trends on international accounting standards, go to http://www.iasplus.com/ 

SPE = Special Purpose Entity that allows companies bearing as much as 97% of the SPE's debt risk to keep that debt off the consolidated balance sheet under U.S. Generally Accepted Accounting Principles.  Enron's double dealing former CFO Andy Fastow and former CEO Jeff Skilling changed the definition of SPE to S _ _ t Piled Everywhere!  Bob Jensen's threads on the Enron scandal are at http://www.trinity.edu/rjensen/fraud.htm and at http://www.trinity.edu/rjensen//theory/00overview/speOverview.htm 

QSPE = Qualified Special Purpose Entity under the FAS 140 Standard.  QSPEs enjoy special privileges under FAS 140, but must meet a number of qualification criteria. One of these is that QSPEs may not exercise an impermissible degree of discretion in managing the assets which they hold, which are the principal source of cash flows supporting payments on the related securities.  

I asked a former Chairman of the Financial Accounting Standards Board to provide me with his off-the-wall remembrances of the history of SPEs in the United States.  His reply is shown below.

Related accounting theory history references can be found in Bob Jensen's introduction to accounting theory at http://www.trinity.edu/rjensen/acct5341/theory.htm 

"The History and Rhetoric of Auditor Independence Concepts," by Sara Ann Reiter and Paul F. Williams --- http://les.man.ac.uk/IPA/papers/44.pdf 

This paper presents an historical and rhetorical analysis of auditor independence concepts. This analysis is relevant as the newly formed Independence Standards Board in the U.S. is beginning work on a conceptual framework of audit independence to use as a basis for regulation. Debate about independence concepts has a long history and some elements of the accounting profession are suggesting that a radical turn away from historical and philosophical conceptions of independence is currently needed. Independence concepts are both defined and limited by the metaphors used to convey them. These metaphors in turn reflect culturally significant narratives of legitimation. Both the metaphors and legitimating narratives surrounding auditor independence are historically rooted in the moral philosophy framework of the ethics of rights. Current independence proposals represent a shift from the profession=s traditional moral philosophy grounding to a basis in economic concepts and theory. The character of the independent auditor is changing from "judicial man” to "economic man.” A number of consequences to the standing of the profession in the public's eyes, as well as to its internal character, may arise from the changing narrative of auditor independencendence.

A message from Gary Kleinman GKlei49593@cs.com on January 12, 2002

Dear Dr. Jensen,

You might be interested in a book on auditor independence that Dr. Dan Palmon of the Rutgers University Graduate School of Management (Newark, NJ) and I (Dr. Gary Kleinman) recently published. The book develops a comprehensive theoretical model of auditor-client relationships. To do so, it draws very heavily on theories originating in psychology, social psychology, sociology, organizational behavior, organization theory and related literature on inter-organizational relationships and regulation. It includes theory-based discussions of influences on the independence of the auditor that range from individual personality, role set membership influences, group membership issues, control systems within the organization, a model of audit firm and client firm relationships, and so on.

The specific title and publishing information is: G. Kleinman and D. Palmon (2001). Understanding Auditor-Client Relationships: A Multi-Faceted Analysis. Markus Weiner Publications, Inc. Princeton, NJ.

The imprint is the Rutgers Series in Accounting Research.

For your information, I have taken the liberty of attaching a Word file containing the preface (here labelled abstract) and the foreword to the book. The latter was written by Dr. Jesse Dillard. I hope you find it interesting.

Sincerely,

Dr. Gary Kleinman 
Fairleigh Dickinson University Teaneck, NJ

Follow-up Note From Bob Jensen

Readers might be interested in a paper that I discovered by searching the Internet using the search word Kleinman http://accounting.rutgers.edu/raw/aaa/2001annual/cpe/cpe4/38PublicCoverSight.pdf 

A link to the Kleinman and Palmon book discussed above --- http://oasis.orst.edu/record=b2169452 

The Saga of Auditor Professionalism and Independence --- http://www.trinity.edu/rjensen/fraud.htm#Professionalism 

This module contains two messages from Steve Zeff (Rice University) and one from me. I will begin with my message. Dr. Zeff, former President of the American Accounting Association, is one of our most dedicated accounting historians. In November 2001, Stephen A. Zeff received the Hourglass Award from the Academy of Accounting Historians. His homepage is at http://www.ruf.rice.edu/~sazeff/ 

Steve's first message below deals with the "state of professional decline" in public accountancy.

His second message (at the bottom) was prompted by my appeal to him to bring more of his vast knowledge of history to bear upon our exchanges on the AECM.

I think both of his messages tell us a lot about the state of affairs that led up to the Enron scandal (which sadly centers in his own home town.)

The only thing that I take exception with is his statement that I am one of the few who really cares about the state of professional decline. There are, in fact, many who have been far more courageous than me to document the decline in professionalism in accounting practice and research, headed by such critical scholars as Steve Zeff, Abraham Briloff, Eli Mason, Tony Tinker, Paul Williams, and others willing to speak out over the past three decades. See http://www.trinity.edu/rjensen/book01q3.htm#082401 

Joel Demski's pessimistic remarks are resounding louder after the fall of Enron --- http://www.cs.trinity.edu/~rjensen/001aaa/atlanta01.htm  
I tried to consistently take a more optimistic stance, but the melt down of Enron has taken its toll on my view of my profession.

I hope you will carefully read the two messages from Dr. Zeff that follow my message below.

Bob

-----Original Message----- 
From: Jensen, Robert 
Sent: Sunday, December 30, 2001 2:13 PM 
To: 'Stephen A. Zeff'
Subject: RE: threads on accounting fraud

Hi Steve,

What a nice message to encounter in my message box. Thank you for the kind words.

I think your remarks should be shared with accounting educators. Would you mind if I place your remarks in my next (probably January 5) edition of New Bookmarks? The archives are at http://www.trinity.edu/rjensen/bookurl.htm 

I hear from you so rarely that it is really a pleasure when I get a message from you. I have more respect for your dedication to our craft than you can ever imagine. I wish that you, like Denny Beresford, would share your vast storehouse of accounting knowledge and history with accounting educators on the AECM --- http://pacioli.loyola.edu/aecm/ 

Our younger accounting educators communicating on the AECM are very bright and skilled in technology, but they are usually a mile wide and an inch deep when it comes to accounting history.

I don't recall if I ever told you this, but your efforts to find Marie in the Rice alumni database led to the subsequent marriage between her and my friend Billy Bender. Both were well into their eighties on the wedding day. They were engaged while both attended Rice University in the 1940s, but the war called Billy away to be a Navy pilot. They had no subsequent contact for over 50 years until you helped Billy find Marie.

Thanks,

Bob

In case you missed it, you might be interested in the following modules that I just added to the Accounting Fraud threads --- http://www.trinity.edu/rjensen/fraud.htm 

*********************************** 
The University of California (UC), the nation's largest university system, has announced plans to join a class action suit against 29 senior executives of the failed Enron Corp. and Big Five accounting firm Andersen. The University claims it lost $145 million in Enron's collapse and seeks to be the lead plaintiff in the class action suit that is forming. http://www.accountingweb.com/item/67343 

*********************************** 
The Securities & Exchange Commission has launched a formal investigation into the recent collapse of energy giant Enron Corp. and has subpoenaed records from Big Five firm Andersen in relation to that investigation. SEC Chairman Harvey Pitt plans to follow a hard line when it comes to auditors who are responsible for problems with published financial statements. http://www.accountingweb.com/item/66986 

Respectfully,

Bob

********************************************************************** 

-----Original Message----- 
From: Stephen A. Zeff [mailto:sazeff@rice.edu]  
Sent: Sunday, December 30, 2001 1:36 PM 
To: rjensen@trinity.edu  
Subject: threads on accounting fraud

Dear Bob:

Yesterday I happened across your Threads on Accounting Fraud, etc. (the Enron case) at http://www.trinity.edu/rjensen/fraud.htm  , and I found it to be fascinating reading. I had already seen quite a few of the items, but I knew I could count on you to pull everything--and I mean everything--together. You do wonders on the Internet.

I don't know if you recall seeing my short article, "Does the CPA Belong to a Profession?" (Accounting Horizons, June 1987). The previous year, I was invited by the chairman of the Texas State Board of Public Accountancy to give a 15-minute address to newly admitted CPAs at the Erwin Center in Austin in November. Even though I am not a CPA, I accepted. I asked if they would mind if I were to say something controversial. They said no. Some 2,500 candidates, relatives and friends, and elders of the profession were in attendance, the largest audience to which I have ever spoken. Typically at such gatherings, the speaker enthuses about the greatness of the profession the candidates are about to enter. Instead, I opted to discuss whether the CPA actually belongs to a profession, and my view came down heavily on the skeptical side. Some of the questions I raised are being raised today about the supposedly independent posture of auditors and about the teaching of accounting. Fifteen years have passed, and things don't seem to have changed.

 

My address raised the question of whether the CPA certification constitutes a union card, a license to practice a trade, or admission to a profession. I reviewed a number of recent trends, including the growing commercialization of the practice of accounting, the increasing number of points of possible conflict between the widening scope of services and the attest function, the decline in the vitality of the professional literature, and the even greater emphasis on the rule-bound approach to teaching accounting in the universities. My conclusion was that accounting was in a state of professional decline that should concern all of its leaders.

Following the address, I expected to be taken to task for using such a solemn occasion, at which speakers are normally heard to celebrate the profession, to deliver a pessimistic message. I was, however, astonished that not one of the professional leaders in attendance uttered a word of criticism. When I pointedly asked several of the senior practitioners for their reaction to my remarks, the general response was a shrug of their shoulders. Yes, professionalism is not what it once was, but there seemed to be little that one could, or should, do to attempt to reverse the trend. This wholly unexpected reaction led me to conclude that I had underestimated the depth and pervasiveness of the malaise in the profession.

I wish you and Erika a Happy New Year.

Steve. --

*************************************************************** 
Subsequent Message received from Steve Zeff

Bob:

It's always a delight to hear from you. Yes, of course you have my permission to place my remarks in your Bookmarks.

In fact, a lot of what I know about accounting history was packed into my recent book, Henry Rand Hatfield: Humanist, Scholar, and Accounting Educator (JAI Press/Elsevier, 2000).

For some years in the early 1990s, I wrote to successive directors of the AAA's doctoral consortium to persuade them that a session should be provided on the history of accounting thought. When the directors replied (which was less than half the time), they said that their planned programs were already full with the standard people and the standard subjects. They typically do bring a standard setter in (usually Jim Leisenring), but the last time someone held a session on accounting history at the consortium was in 1987 (I was the presenter, and the students told me that the subject I treated was entirely new to them.).Virtually no top doctoral programs in the country treat accounting history or even accounting theory. They deal only with how to conduct analytical or empirical research, and the references given to the students are, with a few exceptions (Ball and Brown, and Watts and Zimmerman), from the last six or eight years. Small wonder that tyro assistant professors struggle to learn what accounting is all about once they start teaching the subject. Our emerging doctoral students, for years, have had no knowledge of the evolution of the accounting literature, even the theory that is now finding its way in the work of Stephen Penman and Jim Ohlson.

I think that one of the aims of the consortium should be to "round out" the intellectual preparation of the doctoral students. Instead, the consortium goes deeper in the areas already studied.

Keep up the good work. You are one of the very few people in our field who really cares. And you have done a great deal--more than anyone else I know--to broaden the vision and knowledge base of our colleagues.

Steve. --

Stephen A. Zeff 
Herbert S. Autrey Professor of Accounting
Jesse H. Jones Graduate School of Management 
Rice University 6100 Main Street Houston, TX 77005 tel: (713) 348 6066 fax: (713) 348 5251

Impact of Academic Accounting Research on Practice

-----Original Message-----

From: glan@UWINDSOR.CA [mailto:glan@UWINDSOR.CA]
Sent: Sunday, December 16, 2001 6:36 PM
To: AECM@LISTSERV.LOYOLA.EDU
Subject: Re: UK academics ' research assessed

Hi Jason,

Thanks for the information. Although this is not related, I was wondering whether you or any AECMer may be aware of any publications that discuss the impact of academic research on the development of accounting standards and regulations. For example, do academics have a lot of impact on accounting in Britain and is that more so than in other countries such as U.S., Australia or Canada? Looking at many introductory financial accounting books in Northern America, the main "accounting hero" who is mentioned is Luca Pacioli, the 15th century Italian monk to whom we ascribed double entry accounting. On the other hand, if one looks at a science introductory book, many names like Darwin, Newton, Galileo, Mendel etc. are prominent. 

Do introductory accounting books in the U.K. mention more academics who have contributed to the development of accounting? That could inspire more students to follow the accounting career.

George Lan,
University of Windsor

Hi George,

There are too many confounding variables to assign any kind of numerical weighting to the impact of academic research on accounting and auditing standards.

It is obvious that standard setters cite academic literature and most definitely "listen too" academic researchers either directly or indirectly through the academic researchers that they hire to assist in the standard setting process, including such academics as Paul Pacter, Todd Johnson etc. The FASB and the IASB also have at least one former professor who is likely to be more familiar with the academic literature. The trend is to appoint increasingly sophisticated researchers to these boards, including Katherine Schipper (FASB) and Mary Barth (IASB).

Anecdotally, I think that academic research played a heavy role on the elimination of FAS 33 on current cost and price-level reporting in the U.S. The most influential research in that case was the empirical work of Beaver and his co-authors that pointed to negligible impact of FAS 33 supplemental reports on investment decisions (some of Beaver's conclusions were subsequently challenged by other academic researchers, but these followed the elimination of FAS 33).

What is disappointing are seminal discoveries in academic accounting research (or noteworthy lack thereof). Most seminal discoveries are rooted in accounting practice rather than academic research. In the area of standard setting, this is to be expected. Most standards arise from discovery of new types of contracting such when Salamon Brothers and Bankers Trust "invented" the first interest rate swap for IBM somewhere around 1984. Practicing accountants were struggling with how to account for these swaps long before academics ever heard about such things. Now of course, everybody knows about interest rate swaps since they are used in trillions of dollars of contracting worldwide.

Academic accountants are generally better at analytics, experimentation, and capital markets empiricism than invention. This differs greatly from our friends in science, including computer science, where seminal discoveries commonly give rise to what other academics pounce on for analysis and experimentation. The invention of the laser by a Columbia University professor sitting on a park bench comes to mind. Most of the research that the AAA has designated as seminal really can be traced to earlier "inventions" in accounting practice, economics, finance, and psychology.

You mention Pacioli, a monk who wrote the famous Summa book on algebra around 1494 A.D. Actually, Pacioli's work is more like that of an academic researcher than an inventor. Pacioli did not invent double entry bookkeeping.  Summa was a book on algebra, and Pacioli merely modeled the double entry system into algebra as an illustration of modeling. The "invention" of the famous double entry system took place centuries earlier, and the inventor was most likely some practicing accountant, farmer, or entrepreneur.

More recently, activities based costing (ABC) might be considered a "new" invention in the 20th Century. Volumes of academic accounting research studies have been devoted to ABC costing and ABM. But the ABC invention is actually attributed (I think) to cost accountants at John Deere (now Deere Inc.) rather than professors.

The root problem in academic accounting research, especially analytical modeling, is that the assumptions needed for the analytics are too general and/or too unrealistic to extrapolate to a highly complex real world. The second problem is that academic accountants tend not to be where the action is in terms of newer types of contracting. They are more apt to wait until practitioners write about newer forms of contracting or their colleagues in finance and economics write about such contracts in their own working papers.

The same problem arises in behavioral accounting experiments where the lab settings are too simplistic and/or the decision making students or other subjects are not truly making real-world decisions that affect their fortunes and futures.

I suspect standard setters ignore much of the academic research that they consider too artificial --- notably analytical models, behavioral experiments, and simulations. Years ago one FASB board member said as much to me. This particular FASB member was more interested in academic research found in Accounting Horizons rather than The Accounting Review. However, he also listened to his academic staff members who distilled a wider set of academic research.

Bob Jensen

Reply from George Lan

Hi Bob, 

Thanks for your edifying response to my query about the relationship between accounting research and practice and differences between research in accounting and in the sciences. It has shed much light on many questions that I had. I believe that it also supports the view that one must develop links with the practice side of accounting in order to be more aware of research problems and opportunities. Furthermore, the fact that Pacioli was more of a mathematician than an accountant also suggests to me that broader based accounting and/or multidisciplinary research, does have value. 

George

Reply from Bob Jensen

Hi George

When I was the Program Director for the AAA meetings in NYC years ago (1993?), Joel Demski and Bob Kaplan agreed to share one of the plenary sessions.

I always remember one of Joel Demski's remarks in front of thousands of accounting professors. He asserted that the only academic research invention to be directly placed into accounting practice "probably was dollar-value LIFO."

I am sorry to say that I don't even know who actually invented dollar-value LIFO. It is actually important since that may be the only invention of note by academic accounting researchers.

Knowing Joel, however, this may have been a very sober-faced tongue in cheek assertion.

Bob Jensen

Hi Dale,

Thank you for the correction. I made this statement as a quotation from a speech given by someone else and then asserted that I had no idea who invented dollar value LIFO. Now we know!

Thanks,

Bob

-----Original Message----- 
From: Dale Flesher University of Mississippi [mailto:actonya@HOTMAIL.COM]  
Sent: Friday, January 25, 2002 1:35 PM 
To: AECM@LISTSERV.LOYOLA.EDU 
Subject: Re: The Only Invention of Academic Accountants

Contrary to a recent statement in this forum, Dollar-Value Lifo (DVL) was not developed by a professor. The father of DVL was Herbert T. McAnly, who retired in 1964 as a partner at Ernst & Ernst after 44 years with the firm. Throughout his career, McAnly was known as "Mr. LIFO."

Although he did not develop LIFO, which had been around for decades in the form of the base-stock method, he did develop DVL after the Internal Revenue began accepting LIFO from all types of companies. The Treasury would probably never have agreed to allow all companies to use LIFO (in 1939) had they been able to prognosticate McAnly's idea. He first described the concept in an address delivered at the Accounting Clinic and the Central States Accounting Conference in Chicago in May 1941. His concept was finally accepted by the IRS following the Hutzler Brothers Co. case in 1947 (8 TC 14 (1947)). He later worked with the Treasury Department trying to get more practical regulations relating to LIFO.

Dale L. Flesher 
Professor of Accountancy University of Mississippi

Green Accounting History (Environmental Accounting) --- http://web.nmsu.edu/~dboje/TDgreenhistory.html 

Hi John (in response to a question as to why the accountancy activists remained relatively silent during the Enron scandal),

There are some activists with a much longer and stronger record of lamenting the decline in professionalism in auditing and accounting. For some reason, they are not being quoted in the media at the moment, and that is a darn shame!

The most notable activist is Abraham Briloff (emeritus from SUNY-Baruch) who for years wrote a column for Barrons that constantly analyzed breaches of ethics and audit professionalism among CPA firms. His most famous book is called Unaccountable Accounting.

You might enjoy "The AICPA's Prosecution of Dr. Abraham Briloff: Some Observations," by Dwight M. Owsen --- http://accounting.rutgers.edu/raw/aaa/pi/newsletr/spring99/item07.htm 
I think Dr, Briloff was trying to save the profession from what it is now going through in the wake of the Enron scandal.

I suspect that the fear of activists (other than Briloff) is that complaining too loudly will lead to a government takeover of auditing. This in, my viewpoint, would be a disaster, because it does not take industry long to buy the regulators and turn the regulating agency into an industry cheerleader. The best way to keep the accounting firms honest is to forget the SEC and the AICPA and the rest of the establishment and directly make their mistakes, deceptions, frauds, breakdowns in quality controls expensive to the entire firms, and that is easier to do if the firms are in the private sector! We are seeing that now in the case of Andersen --- in the end its the tort lawyers who clean up or clean out the town.

The problem with most activists against the private sector is that they've not got much to rely upon except appeals for government intervention. That's like asking pimps, whores, and Wendy Gramm to clean up town.  You can read more about how Wendy Gramm sold her soul to Enron at http://www.trinity.edu/rjensen/fraud.htm#Farm 

Bob Jensen

PBS: Electric Money (better termed the history of money before and after computers) --- http://www.pbs.org/opb/electricmoney/ 
(Includes teaching guides and resources for instructors)

Making the Macintosh (History, Computers, Apple) --- http://library.stanford.edu/mac/ 

Vintage Calculators (history, technology) --- http://www.vintagecalculators.com/ 

The Classic Typewriter Page at http://xavier.xu.edu/~polt/typewriters.html  is the creation of Richard Polt, an assistant professor of philosophy at Xavier University and collector of antique typewriters. A rich and well-designed Web site on the history of typewriters.

10. Charles Babbage Institute at http://www.cbi.umn.edu/  is a comprehensive source of scholarly information on the history of computing. The site is maintained by the Charles Babbage Institute Center for the History of Information Processing, a research and archival center at the University of Minnesota.

The Computer History Museum Center http://www.computerhistory.org/ 

"The Birth of the PC:  IBM's personal computer machine changed the world (Computers, History), SiliconValley.com --- http://siliconvalley.com/news/special/birthofpc/ 

Some Computing History From Carnegie-Mellon's famous Herb Simon

"The Steam Engine and the Computer What Makes Technology Revolutionary," by Herbert A. Simon.  In the midst of the "second industrial revolution" ushered in by the computer, perhaps we can learn some lessons from the first industrial revolution, the one triggered by the steam engine--lessons on what we can and should do with computers and on what computers might do to and for us. http://www.educause.edu/ir/library/pdf/erm0132.pdf 

http://www.educause.edu/ir/library/pdf/erm0130.pdf 

http://www.educause.edu/ir/library/pdf/erm0130t.pdf  (text-only) --- This one is easier to print

Why people don't listen to higher education researchers.
An Elusive Science: The Troubling History of Education Research 
By Ellen Condliffe Lagemann University of Chicago Press, 2000

A review is available at http://www.universitybusiness.com/0006/bookshelf.html 

History of distance education and authoring software ---  http://www.trinity.edu/rjensen/290wp/290wp.htm 
For more references, see http://www.trinity.edu/rjensen/000aaa/0000start.htm 

Evolution of Business and Business History in the e-Commerce Era --- a new online free magazine called Darwin Magazine --- http://www.darwinmagazine.com/ 

For a sample, you may want to look at e-Business Basics at http://www.darwinmagazine.com/learn/ebusiness/basics.html 

Have all companies jumped on the e-business bandwagon? Not yet. PricewaterhouseCoopers and The Conference Board found that 70 percent of the global companies they surveyed derive less than 5 percent of their revenues from e-business. Several factors have kept some companies surveyed from rolling out e-business initiatives, including the following: potentially high and uncertain implementation costs; lack of demonstrated ROI within their industry; concern about tax, legal, and privacy issues related to e-business; and scant use of the internet among their customers.

The 100 Other Dumbest Moments in e-Business History --- http://www.ecompany.com/edit/0,,11274,00.html 

The Museum of E-Failure http://www.disobey.com/ghostsites/ 

Bob Jensen's threads on e-Business are at http://www.trinity.edu/rjensen/ecommerce.htm 

The History of the Ideas of a University --- http://quarles.unbc.edu/ideas/gen/history/history.html 

The History of Education Site http://www.socsci.kun.nl/ped/whp/histeduc/index.html 

One of the largest campuses on the Internet --- The University of Wisconsin http://www.wisc.edu/wiscinfo/outreach/ 
Over 100,000 registered online students.

They Blazed the Trail for Distance Education (History) by James Gooch --- http://www.uwex.edu/disted/gooch.htm 

Dear Prof. Jensen

First a thank you for your efforts to share as much of your work and thinking as you can by way of what is served up on your website. As I worked to familiarize myself with changes in the accounting standards area as they relate to financial instruments and to think a bit about how and what to present to my fourth year undergrads in the last five sessions in a special topics in accounting course your site was invaluable.

My approach will lean heavily on the approach that Alex Milburn took when he updated the financial instruments section of Ross Skinners' "Accounting Standards in Evolution" for the revised Skinner and Milburn version - Why the interest, History of standard setting developments in this area including why Canadian standards are currently so far off the mark, Developments in the US including SFAS 133 and the Exposure Draft 204B. Finally I'd like to take up the JWG's Draft Standard.

Have you some thoughts on that standard and how it might be fine-tuned for application within the US? What a fine opportunity for students to experience standard setting in action.

Now I must return to sorting out how I'll present the key conceptual developments so that my students have the basic concepts, issues and theory in place. I'd like for them to be able to wade into whatever application of the "global" standard that eventually confronts them with a some solid footings.

(Added in a second message)
Here are a couple of URLs for two files that will update you the Canadian side of FI issues and on where we were (are) with respect to standards for Financial Instruments.

http://www.camagazine.com/cica/camagazine.nsf/e2000-jun/regulars  http://www.cica.ca/cica/cicawebsite.nsf/public/E_14Dec00 

Ian Hutchinson [ian.hutchinson@acadiau.ca] 
Associate Professor 
Fred C. Manning School of Business 
Room 209, Rhodes Hall Acadia University Wolfville, NS B0P1X0

The book by Milborn and Skinner is as follows:
Accounting Standards in Evolution, 2nd ed., 672pp. 
ISBN: 0130880159 Publisher: Prentice Hall Pub. Date: June 2000

For a summary of the JWG debates, go to the white papers noted below:

If an item is viewed as a financial instrument rather than inventory, the accounting becomes more complicated under SFAS 115.  Traders in financial instruments adjust such instruments to fair value with all changes in value passing through current earnings.  Business firms who are not deemed to be traders must designate the instrument as either available-for-sale (AFS) or hold-to-maturity (HTM).  A HTM instrument is maintained at original cost.  An AFS financial instrument must be marked-to-market, but the changes in value pass through OCI rather than current earnings until the instrument is actually sold or otherwise expires.   Under international standards, the IASC requires fair value adjustments for most financial instruments.  This has led to strong reaction from businesses around the world, especially banks.  There are now two major working group debates.  In 1999 the Joint Working Group of the Banking Associations sharply rebuffed the IAS 39 fair value accounting in two white papers that can be downloaded from http://www.iasc.org.uk/frame/cen3_112.htm.

• Financial Instruments:  Issues Relating to Banks (strongly argues for required fair value adjustments of financial instruments).  The issue date is August 31, 1999.  
  Trinity University students may view this paper at J:\courses\acct5341\iasc\jwgbaaug.htm.  
  Others may go to the IASC download site at http://www.iasc.org.uk/pix/banksjwg.pdf.
  
  

• Financial Instruments Joint Working Group Draft Standard ---  http://www.iasc.org.uk/frame/cen3_112.htm 

FASB's Exposure Draft for Fair Value Adjustments to all Financial Instruments On December 14, 1999 the FASB issued Exposure Draft 204-B entitled Reporting Financial Instruments and Certain Related Assets and Liabilities at Fair Value. This document can be downloaded from http://www.rutgers.edu/Accounting/raw/fasb/draft/draftpg.html 

The Tax History Project http://www.taxhistory.org/ 

Tax History Museum - Tax History Museum   http://www.tax.org/museum/default.htm 

The End of History is Not in Sight

There is a very interesting editorial in the October 5, 2001 edition of The Wall Street Journal.  Several years ago,  I used his "End of History" book in a First Year Seminar that I taught at Trinity University.

"History Is Still Going Our Way," an Editorial by Francis Fukuyama.
Professor Fukuyama, a professor of international political economy at the Johns Hopkins School of Advanced International Studies, is author of "The End of History and the Last Man."

What makes this article interesting is how Professor Fukuyama now reasons that he was wrong about liberal democracy's taking over the world, and he gives credit to Samuel Huntington and others for being more accurate about forecasting the political economy of the future.

A stream of commentators has been asserting that the tragedy of Sept. 11 proves that I was utterly wrong to have said more than a decade ago that we had reached the end of history. The chorus began almost immediately, with George Will asserting that history had returned from vacation, and Fareed Zakaria declaring the end of the end of history.

It is on the face of it nonsensical and insulting to the memory of those who died on Sept. 11 to declare that this unprecedented attack did not rise to the level of a historical event. But the way in which I used the word history, or rather, History, was different: It referred to the progress of mankind over the centuries toward modernity, characterized by institutions like liberal democracy and capitalism.

March of History

My observation, made back in 1989 on the eve of the collapse of communism, was that this evolutionary process did seem to be bringing ever larger parts of the world toward modernity. And if we looked beyond liberal democracy and markets, there was nothing else towards which we could expect to evolve; hence the end of history. While there were retrograde areas that resisted that process, it was hard to find a viable alternative type of civilization that people actually wanted to live in after the discrediting of socialism, monarchy, fascism, and other types of authoritarian rule.

This view has been challenged by many people, and perhaps most articulately by Samuel Huntington. He argued that rather than progressing toward a single global system, the world remained mired in a "clash of civilizations" where six or seven major cultural groups would coexist without converging and constitute the new fracture lines of global conflict. Since the successful attack on the center of global capitalism was evidently perpetrated by Islamic extremists unhappy with the very existence of Western civilization, observers have been handicapping the Huntington "clash" view over my own "end of history" hypothesis rather heavily.

I believe that in the end I remain right: Modernity is a very powerful freight train that will not be derailed by recent events, however painful and unprecedented. Democracy and free markets will continue to expand over time as the dominant organizing principles for much of the world. But it is worthwhile thinking about what the true scope of the present challenge is.

It has always been my belief that modernity has a cultural basis. Liberal democracy and free markets do not work at all times and everywhere. They work best in societies with certain values whose origins may not be entirely rational. It is not an accident that modern liberal democracy emerged first in the Christian West, since the universalism of democratic rights can be seen in many ways as a secular form of Christian universalism.

The central question raised by Samuel Huntington is whether institutions of modernity such as liberal democracy and free markets will work only in the West, or whether there is something broader in their appeal that will allow them to make headway in non-Western societies. I believe there is. The proof lies in the progress that democracy and free markets have made in regions like East Asia, Latin America, Orthodox Europe, South Asia, and even Africa. Proof lies also in the millions of Third World immigrants who vote with their feet every year to live in Western societies and eventually assimilate to Western values. The flow of people moving in the opposite direction, and the number who want to blow up what they can of the West, is by contrast negligible.

But there does seem to be something about Islam, or at least the fundamentalist versions of Islam that have been dominant in recent years, that makes Muslim societies particularly resistant to modernity. Of all contemporary cultural systems, the Islamic world has the fewest democracies (Turkey alone qualifies), and contains no countries that have made the transition from Third to First World status in the manner of South Korea or Singapore.

There are plenty of non-Western people who prefer the economic and technological part of modernity and hope to have it without having to accept democratic politics or Western cultural values as well (e.g., China or Singapore). There are others who like both the economic and political versions of modernity, but just can't figure out how to make it happen (Russia is an example). For them, transition to Western-style modernity may be long and painful. But there are no insuperable cultural barriers likely to prevent then from eventually getting there, and they constitute about fourth-fifth's of the world's people.

Islam, by contrast, is the only cultural system that seems to regularly produce people, like Osama bin Laden or the Taliban, who reject modernity lock, stock and barrel. This raises the question of how representative such people are of the larger Muslim community, and whether this rejection is somehow inherent in Islam. For if the rejectionists are more than a lunatic fringe, then Mr. Huntington is right that we are in for a protracted conflict made dangerous by virtue of their technological empowerment.

The answer that politicians East and West have been putting out since Sept. 11 is that those sympathetic with the terrorists are a "tiny minority" of Muslims, and that the vast majority are appalled by what happened. It is important for them to say this to prevent Muslims as a group from becoming targets of hatred. The problem is that dislike and hatred of America and what it stands for are clearly much more widespread than that.

Certainly the group of people willing to go on suicide missions and actively conspire against the U.S. is tiny. But sympathy may be manifest in nothing more than initial feelings of Schadenfreude at the sight of the collapsing towers, an immediate sense of satisfaction that the U.S. was getting what it deserved, to be followed only later by pro forma expressions of disapproval. By this standard, sympathy for the terrorists is characteristic of much more than a "tiny minority" of Muslims, extending from the middle classes in countries like Egypt to immigrants in the West.

This broader dislike and hatred would seem to represent something much deeper than mere opposition to American policies like support for Israel or the Iraq embargo, encompassing a hatred of the underlying society. After all, many people around the world, including many Americans, disagree with U.S. policies, but this does not send them into paroxysms of anger and violence. Nor is it necessarily a matter of ignorance about the quality of life in the West. The suicide hijacker Mohamed Atta was a well-educated man from a well-to-do Egyptian family who lived and studied in Germany and the U.S. for several years. Perhaps, as many commentators have speculated, the hatred is born out of a resentment of Western success and Muslim failure.

But rather than psychologize the Muslim world, it makes more sense to ask whether radical Islam constitutes a serious alternative to Western liberal democracy for Muslims themselves. (It goes without saying that, unlike communism, radical Islam has virtually no appeal in the contemporary world apart from those who are culturally Islamic to begin with.)

For Muslims themselves, political Islam has proven much more appealing in the abstract than in reality. After 23 years of rule by fundamentalist clerics, most Iranians, and in particular nearly everyone under 30, would like to live in a far more liberal society. Afghans who have experienced Taliban rule have much the same feelings. All of the anti-American hatred that has been drummed up does not translate into a viable political program for Muslim societies to follow in the years ahead.

The West Dominates

We remain at the end of history because there is only one system that will continue to dominate world politics, that of the liberal-democratic West. This does not imply a world free from conflict, nor the disappearance of culture as a distinguishing characteristic of societies. (In my original article, I noted that the posthistorical world would continue to see terrorism and wars of national liberation.)

 

The rest of the editorial (for a while at least) is at  http://interactive.wsj.com/archive/retrieve.cgi?id=SB1002238464542684520.djm&template=pasted-2001-10-05.tmpl

From the Harvard Business School
American Women in the Emerging Industrial and Business Age http://www.library.hbs.edu/hc/unheard_voices/ 

Traditional views about the role of women in society have colored the way that historians have typically approached topics concerning the role of women in the economy. Scholars have recently begun, however, to look more closely at the phenomenon of women in the marketplace. It is clear that women have long been an important factor in the economy, whether driven by necessity to take economic responsibility for themselves and their families, or motivated by the desire to take advantage of entrepreneurial opportunities.

The manuscript collections at Baker Library contain a broad range of materials documenting the history of female small-business owners, investors, professionals, executives, consumers, executors of estates, household managers, and wage laborers. These resources, however, were often overlooked because they were not identified as such either in the printed guides to the collection or in the online records. In May 1999 the Historical Collections Department began a comprehensive survey of eighteenth- and nineteenth-century American manuscript holdings in the Business Manuscripts Collection for material related to the history of women.

Based on a review of each of the finding aids in the Business Manuscripts Collection, more than 300 manuscript collections were identified as possibly containing records related to women's history. These collections were then closely examined to verify whether they contained relevant materials and, if so, to identify the names, occupations, and histories of each woman mentioned. Of the 300 collections examined, 219 proved to contain materials relevant to women's business and financial history in the United States. Detailed notes about the manuscripts and the women were made as the collections were examined.

The final steps of the project, which are currently underway, will ensure that the resources discovered during this project will be readily accessible to scholars. The data gathered from the manuscript collections forms the foundation of a database that will allow researchers to search the information about women found in the collections by a variety of criteria, including name, date, occupation, marital status, and location. In addition, the online catalog records for the manuscript collections that contain resources on the history of women will be edited to provide enhanced subject access, as well as access to records on individual women in the collections.

The online guide that follows is the first of these research tools to be available to scholars, providing both information on the materials that were identified within the manuscript collections, as well as a bibliography of secondary resources.

From the Scout Report
US Department of Labor Women’s Bureau --- http://www.dol.gov/dol/wb/ 

Created by Congress on June 5, 1920, to "promote the welfare of wage earning women," the US Department of Labor Women’s Bureau (DOLWB) seeks to inform the public of women’s work rights and employment issues. Bureau publications include _Fact Sheets on Women in the Workplace_, the legally informative _Know Your Rights Series_, survey results, and special reports on the history of the Equal Pay Act, child care, and financial success stories, among others (.pdf format). A Statistics and Data Library will be of particular use to educators, offering current and historical employment totals and earnings estimates in graphical, presentation formats. Male to Female wage and employment comparisons are also included on site, and some DOLWB studies delineate employment totals by occupation. Links to relevant DOL agencies and reports, as well as other women’s labor organizations are also useful in researching the long history of women’s labor struggles in the US.

From Cornell University:  From Domesticity to Modernity: What Was Home Economics? ---- http://rmc.library.cornell.edu/homeEc/ 

At the turn of the 20th century, home economics was a critical pathway into higher education for American women, largely associated with co-educational land grant institutions such as Cornell. From its inception, collegiate home economics was multidisciplinary and integrative with an emphasis on science applied to the real world of the home, families and communities.

In the early decades of the 20th century, home economists had links to the revitalization of agriculture and rural communities, but also to Progressive Era programs in cities. By the 1920s, home economists at Cornell were best known for research in human nutrition and child development, but their work in fields such as fiber science, design and consumer economics made them central to the growth of the consumer economy as well. Throughout the first half of the twentieth century, collegiate programs prepared thousands of women for public school teaching but many also had careers in the extension service, state and federal governments, industry, hospitals, restaurants and hotels. But by the late 1950s and the early 1960s, broad changes in American women's economics and social roles made collegiate education in home economics seem "old fashioned," an image that did not do justice to its rich history.

In celebration of the New York State College of Human Ecology's Centennial, this exhibition will emphasize how home economics at Cornell University, served as a critical bridge from domesticity in the 19th century to modernity in the 20th century and will attempt to answer the question: What was home economics?

History and Scandal:  FBI Files of Famous Persons --- http://foia.fbi.gov/spies.htm 

"Chasing the Sun" is based on the book Turbulent Skies: The History of Commercial Aviation by T. A. Heppenheimer --- http://www.pbs.org/kcet/chasingthesun/ 

History of grocery stores and supermarkets. (American History) The name of the site is Did You Bring Bottles? --- http://www.groceteria.net/ 

Forwarded by Don Ramsey on January 30, 2002 following the Enron scandal

Here is a fascinating short biography of the founder of Arthur Andersen. Some major points:

--In 1908, the youngest CPA in Illinois --Chairmanship of Northwestern's accounting department

--First college professor to enter public accounting

--Attended classes by night for four years to qualify for a bachelor's degree in business from Northwestern. Ten years later he was a trustee of the university and three years after that its chairman of the board

--straightened out the finances of a pioneering energy empire and won his reputation for honesty by keeping it from bankruptcy

--"If the auditor looked behind the figures into the actual operating methods and problems of the business," says the company's 1974 history, "he could render a constructive report"

--Asked in 1938 to become the first salaried president of the New York Stock Exchange (he declined)

--Considered himself the watchdog of the nation's accounting practices 

--"Bankers and accountants can render great service to the investing public by bringing out the business facts behind the figures of financial statements."

 

Arthur Andersen, The Accountant Who Built His Name on Energy
By Ken Ringle Washington Post Staff Writer Tuesday, January 29, 2002; Page C01

If only he'd been born in Lake Wobegon, Minn., instead of Plano, Ill., Arthur Edward Andersen might have been dreamed up by Garrison Keillor. But, as Keillor would surely agree, "Plano" is an even more evocative birth site for an accountant.

The founder-namesake of the Enron-racked accounting megafirm was born in 1885, the stalwart son of new Norwegian immigrants, and to his dying day in 1947 at age 61, he maintained a passion for preserving Norwegian history. He even held an honorary degree from St. Olaf College.

And would you believe he straightened out the finances of a pioneering energy empire and won his reputation for honesty by keeping it from bankruptcy? Is that a cosmic joke, or what? Not if you bought Enron stock at $80 a share, it's not.

Orphaned at 16, Andersen finished conventional schooling at eighth grade. But he was good at math and worked days as a mail boy and went to class at night to finish high school. He worked as an accountant while attending classes at the University of Illinois where he received a certificate to become, in 1908, the youngest CPA in Illinois. He was 23.

He cut his accounting teeth on Allis-Chalmers farm equipment and at the Jos. Schlitz Brewing Co., among other firms, before risking the security of a corporate job to open his own public accounting firm in 1913. It was a propitious time for accountants: Congress had just authorized the income tax.

The Titanic had sunk the year before. World War I would begin the following year. Most accountants in America were somber little men in green eyeshades, trained by apprenticeship, tidying up endless columns of figures in near-Dickensian anonymity for merchants, manufacturers and banks. Few had college degrees.

Andersen, however, was no ordinary accountant. He had begun teaching at Northwestern University the year after receiving his CPA, had continued while working as comptroller at Schlitz, and soon scrambled to the prestigious chairmanship of Northwestern's accounting department by writing and publishing his own curriculum. When he set up shop on his own at 28, according to the firm's history, he was the first college professor to enter public accounting.

And he didn't stop there. While teaching, churning out audits and managing a rapidly expanding firm by day, he attended classes by night for four years to qualify for a bachelor's degree in business from Northwestern. Ten years later he was a trustee of the university and three years after that its chairman of the board.

By teaching while he was also expanding a business, Andersen became convinced that the accountant's traditional role was too narrow for the business needs of the 20th century. It should really begin, not end, with an audit. "If the auditor looked behind the figures into the actual operating methods and problems of the business," says the company's 1974 history, "he could render a constructive report . . . of real help to management in solving its day-to-day problems. On this type of service he proposed to build his firm."

By the early 1930s, Arthur Andersen & Co. had six offices across the nation, but its biggest challenge would emerge from its home office in Chicago. It involved a sort of proto-Enron energy empire built by a Chicago tycoon named Samuel Insull.

Insull, who had emigrated from England in 1892, had been hired as a secretary by Thomas Edison and gone on to capitalize on that experience to become an electricity entrepreneur. In the early days of electric power, Edison's incandescent lights, patented in 1879, were provided only to Edison-licensed utility companies, many of which were little more than neighborhood affairs. As many in and around Chicago approached bankruptcy in the financial uncertainties of the new century's early years, Edison looked for someone to consolidate these companies and keep them going to ensure a steady supply of electricity for the city and the surrounding Midwest.

Insull volunteered, and within a few years had amassed a conglomerate of companies that included Commonwealth Edison, People's Gas, the Northern Indiana Public Service Co., and a network of electric railroads and interurban streetcar systems that would become the Chicago Rapid Transit Co. With interlocking directorates he soon controlled more than 300 steam-generating plants, nearly 200 hydroelectric plants and numerous other power-generating plants throughout the United States.

The Great Depression of the 1930s, however, caught him vastly overextended financially. The Chicago banks were unable to bail him out, and East Coast banks refused to. But rather than force Insull into bankruptcy, New York bankers chose Arthur Andersen as their representative to manage the reorganization and refinancing of Insull's business holdings.

Though he couldn't save everything from receivership, Andersen managed the financial turnaround of Insull's major energy utilities, saving Chicago's power network and winning both the immense gratitude of the business community and a nationwide reputation for responsibility and rectitude.

So great was his reputation that Andersen was asked in 1938 to become the first salaried president of the New York Stock Exchange, then trying to win back public confidence after the crash of 1929.

Andersen refused. He wanted to keep on accounting.

He -- like many others -- considered himself the watchdog of the nation's accounting practices. Until the day he died he remained deeply immersed in the details of the company, recruiting key employees and approving each client himself. According to the International Directory of Company Histories, he also continued his longtime practice of paying himself 50 percent of the company's profits and splitting the remainder among his partners. He considered such profit-taking honorable compensation for socially constructive work. After all, he'd even made 20 percent profit for Arthur Andersen & Co. while bailing out Insull.

As he told a convention of bankers in Atlanta in 1926: "Bankers and accountants can render great service to the investing public by bringing out the business facts behind the figures of financial statements."

But, as he reminded the graduates of St. Olaf at their 1941 commencement, facts and figures alone are never enough: "Man must be moved by high moral and ethical concepts in all of his relationships. . . . Without this anchorage, he is . . . lost."

Could someone in Andersen's Houston office have shredded those speeches?

Prior to the 20^th Century

Thr SUMMA Project --- http://accounting.rutgers.edu/SUMMA/SUMMA/welcome_2.html 

Virtual Museum of Accounting History --- http://accounting.rutgers.edu/SUMMA/SUMMA/subjects/acchis.html 

• An Accounting Historians Guide to London
• An Accounting Historians Bibliography (temporarily unavailable)
• Accounting Hall of Fame - Maintained at Ohio State University
• Academy of Accounting Historians

A.M.Lymer@bham.ac.uk, University of Birmingham

Book in Progress by Gary Giroux: A Short History of Accounting & Business --- http://acct.tamu.edu/giroux/history.html 

History Question: 
What was the first graduate school of business administration in the world and when was it founded?

History Answer: 
Dartmouth College commenced in 1769 and later founded the world's first graduate school of business administration in 1900. Interestingly, a Wall Street Journal Special Edition ranked Dartmouth as the top business administration graduate school in the Year 2001, although other rankings such as US News do not place Dartmouth at the top.

See the following two links with respect to Dartmouth:

• http://www.nsf.gov/od/lpa/nsf50/nsfoutreach/htm/part_z2/part_drt.htm 
  
  
• http://www.trinity.edu/rjensen/book01q2.htm#routed 

Historic Corporate Reports --- http://www.library.hbs.edu/hc/collections/hcr/ 

Message 1 from WHITCHURCH,Ian [ian.whitchurch@dewr.gov.au] 

Bob,

As far as accounting history goes, you might want to have a look at Geoffrey Parker's work on Lixalde, the paymaster of the Spanish army of the Netherlands in the late 16th century.

To cut a long story short, Lixalde was bent, and was skimming funds meant for the troops.

Where this is interesting for accountants is that he was audited for this after his death in office - in Phillip II's Spain, you didnt get to leave a governorship or other important job until the Royal Audit Office had signed off the books (the Prudent King knew about the temptations of corruption that Republican and Imperial Rome fell prey to).

The auditors eventually signed off a verdict of 'not proven', in exchange for a cash payment, once they had decided that ten years or so was enough to spend on one audit (important documents - later found by Parker - got "lost" in the Sack of Antwerp by Spanish troops following a mutiny). This was very unusual for the royal auditors btw.

I could go back to the uni library and find the article, so you can cite it for your students and on your web page - the auditors here in DEWRSB enjoyed it.

Ian Whitchurch

Message 2 from WHITCHURCH,Ian [ian.whitchurch@dewr.gov.au] 

Bob,

You might also want to add this to your history thread ... it's a work I did in 2000 for Stefan's Florigelium, a SCA e-publication. It's copyright me, but you have my permission to re-use it.

I am also being bugged by a memory of a company-wide internal audit by the Fugger family conglomerate in the 16th century. My memory is telling me it is somewhere in Braudel's 'Meditteranean in the time of Phillip II' (the Fugger family was among the heaviest hitters in European finance around that time, although the soup created after Phillip II went bankrupt in 1575 was too rich for them, and the Genoese regained their position).

I'll be in touch with more stuff ... I've had a look around the web at accounting and auditing history, and I think we can do a lot better than what is out there :)

Ian Whitchurch.

Maritime insurance originated from 'bottomry' loans, which differed from normal commercial lending in that the interest rate was higher, and if the ship did not return due to misfortune, then the loan was not repaid.

To quote Stefani (p44 of "Insurance in Venice from the origins to the end of the Serenissima : Documents published for the 125th anniversary of the company" ; SPA Polografica, Bologna, 1958)

"This loan on bottomry was practiced as follows : the loaner, who also often owned the ship i.e the capitalist (dominus negotii, procertans, commendator) who usually remained on land, loaned capital to a person undertaking a voyage as a shipowner on his own account or on someone else's ship. When the ship reyurned safely to the port of departure (sans navi redeunte) the capital was reimbursed by the borrower (tractator, procerator, accomendatarius) together with a profitable interest. If the ship was lost owing to misfortune, such as storm or piracy (periculum maris et gentis), the capital was not reimbursed".

Stefani cites, but unfortunately does not quote, a number of 12th century bottomry loans.

He dates actual insurance to "23rd October 1347 whereby Giorgio Leccavello insures Bartolomeo Basso for the sum of 107 Genoese lire on a cocca named S. Clara for a voyage from Genoa to Majorca within the term of six months" (Stefani, Insurance in Venice from the orgigins to the end of the Serenessima, SpA Polographica, Bologna 1958 ; p60, citing Bensa "Il contratto d'assicurazione").

He also quotes in full (p60) an insurance contract from 1384 which I quote here in full ;

"The aforesaid insurers run any risk from said place to said place and for the said goods bearing said name and sign and for said estimated value and loaded on the said ship [and run every risk] of God and of sea and any kind of peril and accidents and heavy weather and disasters that may in any way happen, and should the casualty occur as it is required and according to the conditions [of the contract, all insurers carry and run the [risks] in favour of the said Francesvo and partners [for] florins one and one third percent. And if any kind of disaster should happen to the items - may God forbid - the said insurers promise and engage themselves to give and to pay actually and with no objections or to place and have placed [at disposal] in any way or means [in favour] of the said Francesco and partners, or their agents and trustees within the first two months following the day when the casualty shall have been notified to the said insurers, each [insurer shall pay] the at quantity of moneys that they insure at Pisa, at Florence, at Siena, at Genoa or in any other place, land or locality the said Francesco and partners may wish to have them sent to, save that if the payment should be effected outside of Pisa no advantage of money exchange can be requested from the insurers ; and should it happen that as a concequence of the casualty that may happen [at their charge] the insurers repurchase or redeem the said items, they may present them sound and safe at Savona to the said Francessco and partners or anyone entrusted by them and mentioned in the writ, within three months following the day on which the casualty may have happened" (citing Cianelli "Sulle orme di un primato - Il testo della piu antica polizza toscana di assicurazione" ; Bollettino delle Assicurzaioni Generali, Feb-Mar 1955).

Not merely marine insurance but marine re-insurance was practiced in fourteenth century Italy - a Genoese document dated 12 July 1370 has Giovanni Sacco insured by Giuliano Grillo for a voyage from Genoa to Flanders, and Grillo reinsuring the dangerous part of the voyage from Cadiz to Biscay with Goffredo di Bonavia and Martino Maruffo to a sum equal to that he had promised Sacco (p61 of Stefani, citing p200 of Bensa "Il contratto d'assicurazione").

Stefani cites typical premiums for fourteenth century Italy as being 5-19% (p61) for maritime insurance, and about half that for cargos going by land (p63).

The first recorded insurance com;any was a 1424 partership in Genoa of Galeotto and Tobia de' Scipioni with Giulano Dondi, which split the damages and profits three ways (p62, citing Bensa op cit p221).

Life insurance policies are recorded as being issued in Venice in 1589, with Stefani (p119) citing Ventian State Archives records for a policy being issued on 13 November 1589 with seven insurers insuring the life of a debtor, Augustin Bofino, to his creditor, Gieronimo Quarto, to the sum of six hundred ducats. As it was, Bonifo died on the 13th of January 1590, and the sum was paid to Quarto. One can only hope that foul play was not involved (cf the sad case of another Geronimo, Geronimo de Curiel, Phillip II's Factor at the Antwerp Fairs, who was stabbed to death in October 1570 just before he was due to give evidence about official corruption involving Francisco di Lixalde, the Paymaster of the Army of Flanders, and Juan de Albornoz, the Secretary of that army's commander, the Duke of Alva. The charges against di Lixalde and de Albornoz were then dropped. Despite thirty five (!) years work by a team of auditors on his books after Lixalde's sudden death in 1577, the corruption investigation was stopped in 1612 exchange for 13 000 ducats in cash. Parker strongly indicates that di Lixalde was skimming the entire deduction made from soldiers pay for the upkeep of military hospitals. See ch 8 of Geoffrey Parker "Spain and the Netherlands 1559-1659" ; Collins, 1979).

Ian

Henry Rand Hatfield: Humanist, Scholar, and Accounting Educator, by Stephen A. Zeff (JAI Press/Elsevier, 2000) --- http://henryrandhatfield.org/ 

Choose one of these selections to learn more about Hatfield or the Zeff book. A book overview is presented below.

• Outline of Henry Rand Hatfield's Life
• Zeff's "Henry Hand Hatfield" Table of Contents
• Closeup of Book Cover
• Ordering information for "Henry Rand Hatfield..." from JAI Press
  

Every once in a while I dig up a gem while mining the web.  This gem from a philosophy professor weighs about two karats.
Online Guide to Ethics and Moral Philosophy Version 0.9 Robert Cavalier, Carnegie Mellon University --- http://www.lcl.cmu.edu/CAAE/80130/Syllabus.html   
This is a sample of a hypertext course in philosophy.

"FROM THE COUNTING HOUSE TO THE MODERN OFFICE: EXPLAINING ANGLO-AMERICAN PRODUCTIVITY DIFFERENCES IN SERVICES SINCE 1870," by Stephen Broadberry and Sayantan Ghosal,  University of Warwick, October 12, 2001 --- http://www.warwick.ac.uk/fac/soc/Economics/seminars/broadberry.pdf 

The United States overtook Britain in comparative productivity levels for the whole economy primarily as a result of trends in services rather than trends in industry. U.S. overtaking of Britain in market services occurred during the transformation from the “counting house” to the “modern office”, as low-volume, high-margin business gave way to high-volume, low-margin business with multiple operating units managed by a hierarchy of salaried executives. This transformation was dependent on technologies that improved communications and information processing, and occurred first in transport and communications, before spreading to distribution and finance. The pattern of diffusion across sectors in the United States was influenced by the nature of demand and the degree of shelter from competition. The overall diffusion of modern office technology was also dependent on the existence of appropriate “social capabilities”: a labor force that was both well-educated and willing to accept an intensification of the labor process, with high levels of standardization and monitoring. The technologies were slower to diffuse in Britain as a result of lower levels of education and stronger labor force resistance to intensification.

"The Economics Of The Rat Race:  Throughout American history, opportunity and insecurity have come in the same package," by Robert J. Samuelson, Newsweek, July 30, 2001, Page 37 --- http://www.msnbc.com/news/603354.asp 

Culture and business of Florence and Tuscany (History) 
Virtual Uffizi: the Complete Catalog --- http://www.arca.net/uffizi/ 

There are many web references to Pacioli.  For example, a particularly good historical reference is at 
http://www-groups.dcs.st-and.ac.uk/~history/Mathematicians/Pacioli.html. 

Luca Pacioli: The Father of Accounting --- http://members.tripod.com/~FlynF/pacioli.htm 

One of my favorite references to Pacioli is in the book by Poitras cited below.

Monumental Scholarship The Early History of Financial Economics 1478-1776 by Geoffrey Poitras (Simon Fraser University) --- http://www.sfu.ca/~poitras/photo_pa.htm (Edward Elgar, Cheltenham, UK, 2000) --- http://www.e-elgar.co.uk/

1 Introduction 1 2 History of Commerce and Finance 22 3 The Scholastic Analysis of Usury and Other Subjects 74 4 The Evolution of Commercial Arithmetic 113 5 Simple Interest and Compound Interest 143 6 The Valuation of Life Annuities 187 7 Foreign Exchange and the Bill Market 228 8 The Analysis of Joint Stocks 267 9 Development of Derivative Securities 335 10 Manias, Manipulations and Institutional Failures 382 11 English Debates over Interest Rates and Public Credit 418 12 Maritime Insurance, Life Insurance and Other Subjects 449 13 Some Speculative Conclusions 481 Bibliographic Notes 495 References 501 Index 517

Some of the excellent review comments by Professor Bierman are quoted below from pp. 234-235 in ACCOUNTING AND BUSINESS RESEARCH Volume 31 Number 3 Summer 2001 A research quarterly published by The Institute of Chartered Accountants in England & Wales

While Poitras states the study is of the period 1478-1776, pp.22-29 reviews earlier periods. To begin his study of financial economics in 1478, Poitras implicitly equates financial economics with any commercial transaction. Thus the book could have just as well been titled Commercial Transactions 1478-1776. His definition of financial economics is excessively broad. I would have preferred to have had financial economics equated with a subset of commercial transactions that were based on accepted financial theories (e.g. time value of money arithmetic). The definition of financial economics being used allows Poitras to include (Chapter 2) 'History of Commerce and Finance', which describes money markets (bourses and exchanges) as well as types of securities and contacts used from the 12th to the 18th centuries. Money-lending (Lombards and Jews being active participants) is discussed in an interesting manner, but little or no financial economics is introduced.

Life annuities are also discussed in Chapter 2 (p.54): 'In the late 17th and early 18th centuries, analytical solutions were proposed to the problem of valuing life annuities.' But Poitras does not share those solutions with us in Chapter 2. He then states that (p.55) 'oddly enough, until the 19th century, market practice usually involved selling life annuities without taking accurate consideration the age of the nominee.' Obviously, the analytical solutions were flawed.

Chapter 3 discusses 'The Scholastic Analyses of Usury and Other Subjects'. Since financial economics is based on competitive markets, a discussion of the evolution of usury issues is not that enlightening relative to financial economics.

Chapter 4 traces the evolution of commercial arithmetic and beginnings of accounting. The chapter's Appendix shows a Table of future value calculations for 0.10 for years 1 through 30, published in 1613 by Richard Witt, and the present value of an annuity for different interest rates published in 1772. Chapter 5 makes clear that compound interest calculations were well known by mathematicians by the early 17th century, and Chapter 6 describes their uses in valuing life annuities.

There is a switch in focus in Chapter 7 to foreign exchange and the bill market and in Chapter 8 to the analysis of joint stock companies (the predecessor of today's corporations). Chapter 8 includes interesting insights on John Law (the Mississippi scheme), the South Sea Bubble, and the Bubble Act of 1720. Poitras tries to relate the investment activities in 18th century joint stock companies to the portfolio theories of Harry Markowitz and William Sharp.

Chapter 9 deals with derivative securities. Poitras shows that elements of the put-call parity was implemented by de la Vega (1688) and de Pinto (1771).

Chapter 10 is the most interesting chapter for me. Were the Mississippi Scheme, the South Sea Bubble and the Dutch tulipmania of 1634-1637 examples of irrationality, or rather bubbles based on rationality and manipulation or institutional failure? Poitras is even-handed in his evaluation. Most experts on historical bubbles can increase their knowledge by reading this chapter.

Chapter 12 deals with maritime insurance, life insurance and other subjects (e.g. old age pension plans.)

Chapter 13 seeks to establish the origins of financial economics. By the middle of the 18th century, 'sophisticated techniques for pursuing contingent claims such as life annuities had been developed and applied to the establishment of life insurance and pension funds' (p. 483). This conflicts with the earlier observations of Chapters 2 and 4 (see above).

Poitras primarily uses secondary sources and he uses them well. Anyone who intends to work on financial issues originating in the period 1478-1776 or wants to know the origin of the financial concepts being widely used today, would do well to start with this book and the sources used and cited by Poitras.

Harold Bierman, Jr. Cornell University

A Wall Street Journal Business and Economic History Special --- http://interactive.wsj.com/public/current/summaries/mill-1-f.htm 

Take a quick trip back through the past 10 centuries -- see when the first shareholding company was formed, when paper money was born and what developments in finance and companies followed.

Look behind many of the most dramatic events of the millennium, and the catalyst is often the same: Taxes.

A 15th-century bank struggles to catch up to the 20th century. Can it recapture its past glory?

A Japanese temple builder is still going strong after more than 14 centuries.

And more

Turn off da bubble machine! 
Lawrence Welk

Double, double, toil and trouble;
Fire burn and cauldron bubble.
Shakespeare in MacBeth (Act 4 scene 1 line 10-11),

A History Lesson --- http://www.financiallinks.uk.com/Insider/faq/bubbles.htm 
(I can't imagine that no current writers made this "tulip" analogy, although I did not discover any current arti