INSTRUCTORS MANUAL TO
FOUNDATIONS FOR A GENERAL
THEORY OF GENERAL PURPOSE
FINANCIAL REPORTING FOR
BUSINESS BY David Sutton
LATEST UPDATE 2025/2026
, Abstract
Accounting Standards Setters Have Progressively Moved Towards Decision-Useful,
Investor-Focused Fair Value Accounting Standards For General Purpose Financial Reporting
( GPFR). With Some Qualification, The Case Is Made That This Development Is Positive For
Accounting As A Discipline. This Paper Develops A Referent Theory Of Accounting To
Contextualize Standards Setters‟ Implicit Direction, Derived From Existing Research And
Literature. A Central Element In The Development Of This Theory Is The Case M ade For
„Investor-As-GPFR User‟. Against This, Stakeholder Theory And Positive Accountin g
Theory Will Be Identified As Confounding Influences On The Developm ent Of A General
Theory Of Accounting. The Argument Is For The Investor, Both Current And Potential, As
The Sole Legitimate User Of GPFR. The Practical Implications Of The Theory Are
Considered Against The Prevailing Debate Over Optimal Accounting Valuation Method; The
Debate Between Fair Value Measurement And Historical Cost. The Case Is M ade That A
Num ber Of Ostensible Dichotomies In Accounting Thought, Such As Between Relevance
And Accountability, Are Substantially Reconcilable. The Mutual Exclusivity Often Implied Of
Accounting Information Relevance And Accountability-Cum-Reliability Is Rejected. The
Development Of A General Theory Of Accounting Is Timely As Such A Referent The ory Is
Necessary To Legitimize Standards Setting And Secure Accounting‟s Place In An
Increasingly Diverse Financial Information Market. Inferentially, Trends In The Evolution Of
Fair Value Standards Reflect The Dominant Concern To Meet Threats To The Discipline As
A Whole; This Standard Setting Trend Qualified In Speed And Degree By The Narrow
Interests Of „Constituents‟.
2
,TABLE OF CONTENTS
Abstract................................................................................................................. 2
INTRODUCTION........................................................................................................ 6
i. Methodology: Objective Sense Of The Proposed Theory ......................................... 8
ii. SUMMARY ........................................................................................................ 17
iii. Scope And Limitations: Defining The Research Parameters ............................... 18
iv. SUMMARY ....................................................................................................... 21
Chapter One ......................................................................................................... 23
1.0 INTRODUCTION................................................................................................ 23
1.1 Historical Background .................................................................................... 23
1.2 The Academy.................................................................................................. 27
1.2.1 INTRODUCTION ............................................................................................. 27
1.3 The Modern Era: Accounting As G[A]AP (To 1956).............................................. 30
1.4 The Rise Of Normative Accounting Theories ..................................................... 32
1.4.1 Continuously Contemporary Accounting ....................................................... 33
1.5 The Rise Of PAT And Its Claim To Singular Legitimacy ...................................... 37
1.6 Agency Theory ............................................................................................... 43
1.7 SUMMARY: The Influence Of The Academy And Influences On The Academy
. ........................................................................................................................... 44
Chapter Two......................................................................................................... 46
The Development Of The Accounting Conceptual Frameworks ................................ 46
2.0 INTRODUCTION................................................................................................ 46
2.1 A Brief History Of Developments In Regulation And Its Theoretical Base
(Conceptual Frameworks) .................................................................................... 46
2.2 Broad Trends In The Development Of Conceptual Frameworks ......................... 54
2.3 SUMMARY Of Broad Trends In Regulation Development .................................... 60
2.4 Political Influences On Regulation ................................................................... 60
2.5 SUMMARY ...................................................................................................... 70
Chapter Three ...................................................................................................... 72
A General Theory Of Accounting ............................................................................ 72
3.0 INTRODUCTION................................................................................................ 72
3.1 The Current State Of Accounting Theory .......................................................... 72
3.2 Foundations For A General Theory Of Accounting ............................................. 74
3.2.1 The Socio-Economic Environment ................................................................ 76
3.2.2 Globalization ............................................................................................... 78
3.2.3 SUMMARY.................................................................................................... 80
3.3 GPFR User Defined ......................................................................................... 80
3.3.1 INTRODUCTION ............................................................................................. 80
3.3.2 The Determinative Characteristics Of A GPFR User ....................................... 82
3.3.3 Investors As GPFR Users: Current And Potential?.......................................... 83
3.3.4 Who Is Not A Stakeholder In GPFR? .............................................................. 88
3.3.4.1 Labour/Unions .......................................................................................... 92
3.3.4.2 Auditor, Management, Preparer Interests In GPFR ..................................... 94
3
, 3.3.4.4 Lobbyists/Government/Regulators ............................................................. 97
3.3.4.5 SUMMARY................................................................................................. 99
3.4.1 What Is Stewardship?................................................................................. 100
3.4.2 Decision-Usefulness ................................................................................... 104
3.4.3 SUMMARY Of The Debate..............................................................................107
Chapter Four........................................................................................................109
Fair Value: An Implication Of The Proposed Theory? ...............................................109
4.0 INTRODUCTION ...............................................................................................109
4.1 Historical Cost ............................................................................................... 110
4.1.1 The Case For Historical Cost ......................................................................... 111
4.1.2 Structural Advantages Of Historical Cost...................................................... 113
4.1.3 Bases To Question Historical Cost ................................................................ 114
4.1.4 SUMMARY ................................................................................................... 118
4.2.1 Fair Value ................................................................................................... 118
What Is Fair Value Accounting? ............................................................................. 118
4.2.2 The Case For Fair Value Accounting .............................................................120
4.2.3 The Purposive Approach ..............................................................................122
4.2.4 Industry Support For Fair Value ...................................................................123
4.2.5 Academic/Empirical Support For Fair Value..................................................125
4.2.6 A Response To The Manipulation Risks Of Fair Value.....................................129
4.26 The Misspecification Of Reliability: Accounting For Intangibles ........................ 131
4.2.7 Problems For Fair Value Accounting.............................................................132
4.3.0 The Counter-Argument: The Conceptual Case For Fair Value .........................147
4.3.1 SUMMARY ...................................................................................................155
Chapter Five ........................................................................................................156
5.0 Discussion And Conclusion .............................................................................156
5.1 Conclusion ..................................................................................................... 161
Glossary ..............................................................................................................162
References ..........................................................................................................163
Appendix One.......................................................................................................195
Appendix Two ..................................................................................................... 203
Appendix Three ................................................................................................... 206
4
FOUNDATIONS FOR A GENERAL
THEORY OF GENERAL PURPOSE
FINANCIAL REPORTING FOR
BUSINESS BY David Sutton
LATEST UPDATE 2025/2026
, Abstract
Accounting Standards Setters Have Progressively Moved Towards Decision-Useful,
Investor-Focused Fair Value Accounting Standards For General Purpose Financial Reporting
( GPFR). With Some Qualification, The Case Is Made That This Development Is Positive For
Accounting As A Discipline. This Paper Develops A Referent Theory Of Accounting To
Contextualize Standards Setters‟ Implicit Direction, Derived From Existing Research And
Literature. A Central Element In The Development Of This Theory Is The Case M ade For
„Investor-As-GPFR User‟. Against This, Stakeholder Theory And Positive Accountin g
Theory Will Be Identified As Confounding Influences On The Developm ent Of A General
Theory Of Accounting. The Argument Is For The Investor, Both Current And Potential, As
The Sole Legitimate User Of GPFR. The Practical Implications Of The Theory Are
Considered Against The Prevailing Debate Over Optimal Accounting Valuation Method; The
Debate Between Fair Value Measurement And Historical Cost. The Case Is M ade That A
Num ber Of Ostensible Dichotomies In Accounting Thought, Such As Between Relevance
And Accountability, Are Substantially Reconcilable. The Mutual Exclusivity Often Implied Of
Accounting Information Relevance And Accountability-Cum-Reliability Is Rejected. The
Development Of A General Theory Of Accounting Is Timely As Such A Referent The ory Is
Necessary To Legitimize Standards Setting And Secure Accounting‟s Place In An
Increasingly Diverse Financial Information Market. Inferentially, Trends In The Evolution Of
Fair Value Standards Reflect The Dominant Concern To Meet Threats To The Discipline As
A Whole; This Standard Setting Trend Qualified In Speed And Degree By The Narrow
Interests Of „Constituents‟.
2
,TABLE OF CONTENTS
Abstract................................................................................................................. 2
INTRODUCTION........................................................................................................ 6
i. Methodology: Objective Sense Of The Proposed Theory ......................................... 8
ii. SUMMARY ........................................................................................................ 17
iii. Scope And Limitations: Defining The Research Parameters ............................... 18
iv. SUMMARY ....................................................................................................... 21
Chapter One ......................................................................................................... 23
1.0 INTRODUCTION................................................................................................ 23
1.1 Historical Background .................................................................................... 23
1.2 The Academy.................................................................................................. 27
1.2.1 INTRODUCTION ............................................................................................. 27
1.3 The Modern Era: Accounting As G[A]AP (To 1956).............................................. 30
1.4 The Rise Of Normative Accounting Theories ..................................................... 32
1.4.1 Continuously Contemporary Accounting ....................................................... 33
1.5 The Rise Of PAT And Its Claim To Singular Legitimacy ...................................... 37
1.6 Agency Theory ............................................................................................... 43
1.7 SUMMARY: The Influence Of The Academy And Influences On The Academy
. ........................................................................................................................... 44
Chapter Two......................................................................................................... 46
The Development Of The Accounting Conceptual Frameworks ................................ 46
2.0 INTRODUCTION................................................................................................ 46
2.1 A Brief History Of Developments In Regulation And Its Theoretical Base
(Conceptual Frameworks) .................................................................................... 46
2.2 Broad Trends In The Development Of Conceptual Frameworks ......................... 54
2.3 SUMMARY Of Broad Trends In Regulation Development .................................... 60
2.4 Political Influences On Regulation ................................................................... 60
2.5 SUMMARY ...................................................................................................... 70
Chapter Three ...................................................................................................... 72
A General Theory Of Accounting ............................................................................ 72
3.0 INTRODUCTION................................................................................................ 72
3.1 The Current State Of Accounting Theory .......................................................... 72
3.2 Foundations For A General Theory Of Accounting ............................................. 74
3.2.1 The Socio-Economic Environment ................................................................ 76
3.2.2 Globalization ............................................................................................... 78
3.2.3 SUMMARY.................................................................................................... 80
3.3 GPFR User Defined ......................................................................................... 80
3.3.1 INTRODUCTION ............................................................................................. 80
3.3.2 The Determinative Characteristics Of A GPFR User ....................................... 82
3.3.3 Investors As GPFR Users: Current And Potential?.......................................... 83
3.3.4 Who Is Not A Stakeholder In GPFR? .............................................................. 88
3.3.4.1 Labour/Unions .......................................................................................... 92
3.3.4.2 Auditor, Management, Preparer Interests In GPFR ..................................... 94
3
, 3.3.4.4 Lobbyists/Government/Regulators ............................................................. 97
3.3.4.5 SUMMARY................................................................................................. 99
3.4.1 What Is Stewardship?................................................................................. 100
3.4.2 Decision-Usefulness ................................................................................... 104
3.4.3 SUMMARY Of The Debate..............................................................................107
Chapter Four........................................................................................................109
Fair Value: An Implication Of The Proposed Theory? ...............................................109
4.0 INTRODUCTION ...............................................................................................109
4.1 Historical Cost ............................................................................................... 110
4.1.1 The Case For Historical Cost ......................................................................... 111
4.1.2 Structural Advantages Of Historical Cost...................................................... 113
4.1.3 Bases To Question Historical Cost ................................................................ 114
4.1.4 SUMMARY ................................................................................................... 118
4.2.1 Fair Value ................................................................................................... 118
What Is Fair Value Accounting? ............................................................................. 118
4.2.2 The Case For Fair Value Accounting .............................................................120
4.2.3 The Purposive Approach ..............................................................................122
4.2.4 Industry Support For Fair Value ...................................................................123
4.2.5 Academic/Empirical Support For Fair Value..................................................125
4.2.6 A Response To The Manipulation Risks Of Fair Value.....................................129
4.26 The Misspecification Of Reliability: Accounting For Intangibles ........................ 131
4.2.7 Problems For Fair Value Accounting.............................................................132
4.3.0 The Counter-Argument: The Conceptual Case For Fair Value .........................147
4.3.1 SUMMARY ...................................................................................................155
Chapter Five ........................................................................................................156
5.0 Discussion And Conclusion .............................................................................156
5.1 Conclusion ..................................................................................................... 161
Glossary ..............................................................................................................162
References ..........................................................................................................163
Appendix One.......................................................................................................195
Appendix Two ..................................................................................................... 203
Appendix Three ................................................................................................... 206
4
