Before diving into the Kimwell PDF itself, it is essential to define the term "constructive accounting." Unlike traditional accounting, which records explicit transactions (e.g., a sale, a purchase, a loan), constructive accounting deals with implied or constructive obligations.
According to the principles outlined in the Kimwell document, a constructive obligation arises when a company’s past practice, published policies, or sufficient statement indicates that it will accept certain responsibilities. Key examples include:
The Kimwell PDF is revered because it provides a structured, three-step approach to identifying and measuring these constructive events.
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One of the most cited tables in the Kimwell PDF is the "Constructive Measurement Table," which guides users to measure constructive obligations at the lower of cost or fair value where the obligating event occurred, not at settlement date.
Kimwell argues that a constructive obligation exists if a reasonable third party would conclude that the entity has no realistic alternative but to transfer assets. This is distinct from a legal obligation, which requires a contract or statute. Before diving into the Kimwell PDF itself, it
Who or what is "Kimwell"? In academic accounting circles, "Kimwell" refers to Dr. Harold Kimwell, a mid-20th century accounting theorist who published a series of monographs on constructive liabilities. While his original books are out of print, a digital scan—the "Kimwell PDF"—has circulated since the early 2000s.
The document (formally titled "Constructive Accounting: Recognition and Measurement of Implicit Transactions") is approximately 47 pages long and includes:
This PDF is particularly popular among self-study candidates for the CPA exam because the appendix mirrors the difficulty of simulation (TBS) questions. The Kimwell PDF is revered because it provides
A major theme in constructive accounting is the concept of materiality. The Kimwell PDF argues that when reconstructing past records, perfection is the enemy of progress. It teaches practitioners to set a materiality threshold (e.g., $500) and focus intense verification only on items above that line, using statistical sampling for smaller transactions.
One of the hallmarks of constructive accounting is the detailed treatment of partnerships. Kimwell’s text provides rigorous exercises on:
