Corporate governance and earnings management ... - CEREG

1973 (Bensadon, 2002, p. 58). There was then at that time a conflict between the French
“regulation” and the “desires” of groups.
3.4. Phase 3: the dynamic phase
3.4.1. United States: the dynamic position comes out on top (1970 - 2001)
In a free competition economy, the accounting standards system is not generally in favor of
pluralism: to regulate competition, the standards must have the dominant interests at heart.
This does not mean matters are always simple.
In the 1940s, three main phenomena were visible on the American scenery: the doctrine and
practice of writing off goodwill was in decline, the dynamic doctrine and practice began to
take over, and there was still some resistance to doctrines and practices that wanted goodwill
to have no impact on profit.
a) The decline of the write-off
The decline of the write-off approach can be observed in the theory, regulations and
practice. This calls for some explanation. In the doctrine, the decline is clear, at least from
around 1945-1970. The leading author of accounting literature at the time was the renowned
Paton (1962), who like other authors such as Walker (1953), Kripke (1961), Hylton (1964;
1966) and Wolff (1967, p. 258), was in favor of dynamic approaches and against goodwill
write-off. His opponents were only minor authors, often practitioners such as Catlett and
Olson (1968), and Spacek (1973), who found themselves in the minority in discussion
committees on the development of accounting standards.
The decline in the regulations is just as obvious. In 1948, the American Accounting
Association (AAA) decided that “adherence to the cost basis of accounting requires that there
should be no suppression or unwarranted assignment to expense of the cost of existing assets”
(AAA, 1948, p. 340). Although not stated explicitly, this was aimed at “arbitrary” write-offs,
particularly charging to reserves.
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