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Conventional Principal and Income Accounting and Its Effect on Institutional Investment Policy

Rosecrans Baldwin
Financial Analysts Journal
Vol. 25, No. 2 (Mar. - Apr., 1969), pp. 60-67
Published by: CFA Institute
Stable URL: http://www.jstor.org/stable/4470494
Page Count: 8
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Conventional Principal and Income Accounting and Its Effect on Institutional Investment Policy
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Abstract

Conventional rules regarding accounting distinctions between principal and income are deeply entrenched both in law and custom. These rules require that capital gains on the investment portfolios of universities and other institutions must be treated as principal accretions and cannot be included in income. Has this requirement had a deleterious effect on the investment policies followed by American institutions during these last twenty years of unparalleled economic growth? If so, isn't it time that the rules be scrapped?

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