Report of the Committee on Foundations of Accounting Measurement.

Abstract This article presents information on the report of the Committee on Foundations of Accounting Measurement of the American Accounting Association for the year 1971. Recommendations for the directions in which future accounting measurement systems should be developed are discussed. The Committee did not arrive at these conclusions in a vacuum. Committee members reached them after careful investigations of the foundations of present accounting measurement systems. In particular, the Committee recognizes two entirely different orientations in the present accounting measurement systems, which, from the viewpoint of measurement methodology, should be carefully distinguished. One is accounting aimed at reconciling the equities of shareholders and other interested parties inside or outside an organization, in order to achieve an equitable distribution of the proceeds or benefits from operations. The other is accounting aimed at providing useful information for management and investor decisions, especially decisions concerning resource allocation. One shall call the former "equity accounting" and the latter "operational accounting."