Limperg instituut

Thank You

On 17 May Prof.dr Peter Easton, Notre Dame Alumni Professor of Accountancy and director of the Center for Accounting Research and Education was presented the Limperg Medal by Stephan Hollander for his contribution to the accounting research community in the Netherlands.

His specific achievement is that he has been teaching financial accounting research to Dutch PhD students since 2003. Over the years he taught almost 300 PhD students. Many of these students benefited a lot from Peter’s courses. Many of them make important contributions to the accounting literature and have assumed the position of full professor in accounting at various schools in Europe and even at the most prestigious schools in the USA. The medal is awarded by the Limperg institute in order to express the Institute’s gratitude for professor Easton’s work in the Limperg education program. Peter has taught the capital market course for 18 years.

It is worth to know that Peter’s work is very akin to the ideas put forward by Theodore Limperg himself. Peter and Limperg had a similar view on how replacement values (fair values) are important. They both put a large emphasis on the profit and loss account in its own right, and they believe that the accountant is obliged to produce results that can be trusted.

The meaning of replacement values

In 1920 Limperg introduced the idea of replacement value and later stimulated Philips executives to apply this idea in their financial statements, which they did. Of course the idea of replacement value has developed into the notion of fair value. It happens to be the case that Peter Easton was the first academic to examine the effects of fair values. He did so in Australia which was the first country to introduce the fair value concept in the financial statements.

The meaning of Profit

With limperg Peter Easton puts strong emphasis on the profit and loss account next to the balance sheet.

In the thirties the Economist wrote:

“Investors accustomed to the Spartan laconicism of British auditor’s reports will envy shareholders in Philips Incandescent Lamp Company. The 1933—’34 report of this company includes two long and closely printed pages embodying the auditors ’ observations on the balance-sheet — and also, incidentally, the profit-and-loss account, which British auditors do not regard as part of their duty to certify.”

Peter Easton dedicated a very large number of papers trying to understand how numbers that appear in the profit-and-loss account are relevant to the market value of the firm.

The meaning of ensued trust

Finally Limperg is known for introducing the doctrine of ensued trust in the accounting world. This Doctrine maintained that “the auditor is obliged to perform his work in such a way that he does not shame the expectations which he seemed to raise among the wise; and, conversely, the auditor may not raise greater expectations than is justified by the work performed.

How does Peter relate to this view of Limperg? If I have to characterize the course that Peter teaches for the PhD program using one note it is knowing your data. Peter made sure that students know exactly what the features of the data are so that the can make the right inferences of the outcomes of their analyses, i.e. their results can be trusted. In other words, Peter is also a defender on ensued trust albeit that for him it reflects how well one can trust research results. Many students that took Peter’s course will have a lifetime benefit thanks to Peter with making sure that their results can be trusted as they know their data!

Thank you Peter!

Jan Bouwens