Some Recent Trends in Accounting Changes

Abstract

The Wall Street Journal (WSJ) in its Earnings Digest column and in feature stories annually summarizes the financial results of about 4,500 companies, including their changes in accounting methods.' Information about such changes is obtained by scrutinizing the company's 2 Thus, changes in accounting methods, which constitute inconsistencies,3 are disclosed in the WSJ even if they were not sufficient to cause the company's auditor to issue a qualified opinion. I surveyed the Earnings Digest section of the WSJ for the period from January 1, 1967 through December 31, 1969. This period may be taken as an approximate surrogate for the calendar reporting years 1967, 1968, and 1969, though there is generally a lag of one to four months between the close of a company's fiscal year and the issuing of its annual report. All reported changes in accounting made by industries (see below) were noted and broken down into several major categories. Whether the change was made retroactive to the prior year was also noted. A comparison of absolute number of changes, between years and by categories, is summarized in Table 1. A relative comparison of categories of change, as a percentage of total changes in each year, is also summarized in that table. Of the 4,500 companies in the universe, I would estimate that some 2,500 are industrials (that is, companies other than utilities, regulated