Lorenzo de Minico's Thought in the Development of Accounting Theory in Italy: An Understated Contribution

Abstract

The first decades of the twentieth century were years of innovation for Italian accounting theory: a new scientific approach, the Economia aziendale, was developed and affirmed as the dominant paradigm. Among its main ideas were new concepts of capital and income, strongly influenced by Irving Fisher. The analysis of Lorenzo de Minico's entire scientific output demonstrates that he played a significant role in the ‘revolution’ which history credits almost exclusively to Gino Zappa. A critical methodological issue is confirmed: the lack of completeness in doing accounting history might lead to imprecise or incomplete knowledge of the evolution of accounting. Furthermore, this article tries to demonstrate that the structure of the real economy has played an important role in the assimilation of international theories in Italy, leading accounting theory in that country to be quite far removed from the Anglo-American approach.

Keywords:

• Early twentieth century
• Italy
• capital
• income
• economic value of capital model
• flows of services

Acknowledgements

The Author is grateful to Professor Lino Cinquini and to the anonymous referees for their precious observations.

Notes

1. Being addressed to an international audience, this paper mainly cites articles and books written in English. References to works in other languages are limited to the essentials.

2. Although it has sometimes been translated with the expression ‘concern economics’ (AIDEA, 1980), here the Italian original name Economia aziendale is preferred (Zan, 1994; Viganò997, 1998; Zambon & Zan, 2000; Mattessich, 2003).

3. Method deals with the technique of bookkeeping, with the formal rules of representation and with the way of using instruments of accountancy; an accounting system is defined by the object of observation recorded into accounts.

4. A series of accounts is dedicated to elements of capital (assets, liabilities and net wealth) and another series is used to record increases and decreases of net wealth, through changes in the value of each asset or liability, according to an atomistic vision of the nature of capital.

5. Canziani (1987) published an in-depth analysis of Zappa's theoretical and methodological premises, connecting them to the main European philosophical schools.

6. The two measures of income, the total one and the annual one, must be congruent, in the sense that periodic income is the allocation of a quota of total income to the accounting period (Galassi, 1980).

7. Many authoritative scholars were involved in the debate (Ceccherelli, Giannessi, Onida, D'Ippolito, Vianello, De Gobbis, D'Alvise, Masi); the most significant part of this debate was published in the Rivista Italiana di Ragioneria (Antinori, 2003).

8. A more detailed comparative analysis of this issue is conducted in the fourth section of this paper.

9. Lorenzo de Minico also has a marginal position in the most important accounting history contributions written in Italian (Melis, 1950; Onida, 1951; Amodeo, 1964; Giannessi, 1964; Pezzoli, 1977; Ferraris Franceschi, 1994; Canziani, 1997; Catturi, 1997; Costa, 2001).

10. Although de Minico's EVC model (1935) had anticipated the writings of Zappa (1937) about economic capital, he was not mentioned in Galassi's brilliant analysis of Zappa's thought regarding capital and income (Galassi, 1980), nor in bibliographical references. Viganò (1967), one of de Minico's indirect disciples, wrote that his applications of this model were sounder than those proposed by others, but he did not affirm his anticipation of Zappa's more famous propositions.

11. See also Previts et al. (1990: pp. 137–139).

12. Lorenzo de Minico was born in Torre Le Nocelle, a little town in the mountains 120 kms. from Naples, on 1 July 1896, the son of a poor chiseller.

13. As a middle-school student he was so brilliant that his parents made huge sacrifices to enable him to continue his studies at the Professional High School for Accountants. He participated in the First World War as a lieutenant in the artillery and got his high school degree during the war, as did many Italian army officers. As in other countries (Mattessich, 2003), in Italy at that time there were no University degrees in business or accounting. Economics was taught in Law Faculties while business disciplines, such as accounting or management, were included in professional high school curricula; they were also taught in Superior Schools of Business, autonomous schools similar to Universities.

14. For example, he was the first Italian scholar to write about leverage and break-even analysis.

15. To confirm the fundamental independence of his thought, it is interesting that a volume about the dynamics of capital (Rinnovamento e liquidit del Capitale nelle imprese industriali—Renewal and liquidity of Capital) circulated in two editions: the first one, printed in 1928, with just two or three citations of Italian authors; the second one, published three years later, in the same year as his public contest to become full professor, was identical to the first, except for the addition of many footnotes citing the main scholars of his time. In 1932 he became full professor of accounting. From then on, citations almost disappeared from his publications, as far as explicit references to the contributions of his colleagues are concerned.

16. Antinori cites the case of Vincenzo Masi, a theorist of Besta's ‘capital system’, who could not gain a professorship because of his lack of acquiescence to Zappa's dominant school.

17. Even nowadays, in Italy, professors are chosen with public selection procedures; then, after three years they are subject to a confirmation by a special commission of professors, which examines the scientific output of the three-year period. This passage is more a stimulus to continue research activity than a real verification process, as cases of refused confirmations are very rare.

18. He had been Dean of the Faculty of Economics and Business and President of the Consiglio Nazionale dei Dottori Commercialisti (national body of CPA).

19. A significant part of de Minico's legacy is the openness to the international dimension of accounting studies. Amodeo impressed this direction to his disciples and they have done this with theirs, producing valuable research and studies in international accounting, unfortunately written in Italian, as are the vast majority of Italian publications in accounting. Furthermore, when he was President of the Italian national board of CPAs, Amodeo gave a definitive stimulus towards the introduction of GAAP and auditing in Italy, creating the national standard-setting body, to which, over the years, many of his disciples participated. Sensibility to the EVC model has remained one of the characteristics of the Neapolitan School of Accounting, particularly through relevant studies by Viganò. (1967), Viganò. (2001) and Catuogno (2003).

20. The circumstance is confirmed by an analysis of the Italian National Unified Catalogue of National Libraries Service and of indexes of the other libraries accessible via the world wide web.

21. He referred to Amiaud (1920), Cellerier (1905), Croizè (n.d.), Folliet (1920), Jennin (1924), Lemaire (1907) and Quesnot (1919).

22. A conception that had been contested by Hatfield (1909).

23. See the works by the joint project of IASB and FASB on the improvement of the Conceptual Framework of GAAPs.

24. In his personal library, still preserved by his sons, there are no books on philosophy; his books, unlike Zappa's, contain no reference to philosophers. None of his ‘obituaries’ depicted him as a man of wide knowledge of philosophy or epistemology, nor did his sons, when directly questioned.