Academic journal article Accounting Historians Journal

Farmers, Politics, and Accounting: The History of Standard Values-An Accounting Convenience or Political Arithmetic?

Academic journal article Accounting Historians Journal

Farmers, Politics, and Accounting: The History of Standard Values-An Accounting Convenience or Political Arithmetic?

Article excerpt

INTRODUCTION

Farming is the backbone of the New Zealand economy, and as a result, influences all aspects of New Zealand life. Sir Keith Holyoake, New Zealand's prime minister from 1960 to 1972, was often quoted as saying, "if farmers are happy the country will be happy" [Gustafson, 2007, p. 314]. Agriculture was, and still is, essential to New Zealand's economy. (1) Consequently, the government was directly involved in agriculture decisions related to production and marketing, as well as indirectly through agriculture producer boards for the apple and pear, meat, dairy, and wool industries. Members of New Zealand's Parliament were often farmers, thus farming interests were well-represented at this level. Holyoake was the archetypical farmer-politician as was William Massey ("Farmer Bill"), New Zealand's prime minister from 1912 to 1925. Massey was heavily involved in the period when standard values for farm accounting emerged, and Holyoake was similarly involved when standard-value accounting (SVA) was being called into question as an accounting practice. This paper uses archival material to explore the interrelation between farmers, accounting, and the state in the introduction and use of SVA. In doing so, we examine the events that came together and influenced the emergence and subsequent decline of SVA in New Zealand.

Accounting is viewed as a social and institutional practice [Miller, 1994], and the literature reflects a concern for understanding the influences on accounting practice in specific settings [Potter, 2005]. We investigate the incentives, actions, and consequences associated with the choice of a particular accounting practice by tracing the history of SVA (2) in the social, political, and economic context of the agricultural industry in New Zealand. Our aim is to increase understanding of the forces that influence accounting change. SVA emerged with the support of the state, accountants, and farmers as the tax regime slowly moved to an income tax for farmers from 1915. The paper examines how SVA was not simply an accounting convenience but became a practice of political arithmetic, mediating the economic power of the farmers with the rest of the tax base of New Zealand. Farming interests influenced political processes and economic considerations, and thus, SVA for livestock became a device that represented the power of farmers to receive favorable tax treatment compared to other New Zealanders, while demonstrating they carried their fair share of the country's tax burden. "Political arithmetic" is used to highlight how SVA became a technique of socio-political management for the exercise of power under the cloak of objectivity and neutrality.

Taxation is intertwined with accounting, but there is a dearth of tax history in the accounting history literature as noted by Lamb [2003], Noguchi [2005], and Oats and Sadler [2008]. This study of SVA provides a good example of how taxation is intertwined with accounting, and how an accounting technique emerges and changes over time because it intersects with organizational, industry, and fiscal policy rationales. Standard values were used to value livestock on hand in farm accounts. The Inland Revenue Department allowed the farmer to make his own assessment (with some limitations) of the average value of each class of livestock and to use this figure from year-to-year in calculating taxable profits [Payne, 1965]. Standard values provided an element of consistency in livestock valuation, but because actual market values often differed, the tax liability could be deferred (almost indefinitely) through the use of this technique. Standard values were often 10% or less of the market value of the livestock, and it was only when stock were disposed of, that the difference between book value and market value became assessable income for tax purposes [McCrea et al., 1990].

The accounting profession was effectively co-opted by the farmers to support their privileged position in the economy. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.