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 ■c
TM

Course International Financial Management

Shibashish Mukherjee
■c
TM

http://create.mheducation.com

Copyright 2017 by McGraw-Hill Education. All rights

reserved. Printed in the United States of America. Except as
permitted under the United States Copyright Act of 1976, no part
of this publication may be reproduced or distributed in any form
or by any means, or stored in a database or retrieval system,
without prior written permission of the publisher.

This McGraw-Hill Create text may include materials submitted to

McGraw-Hill for publication by the instructor of this course.
The instructor is solely responsible for the editorial content of such
materials. Instructors retain copyright of these additional materials.

ISBN-10: 1307089585 ISBN-13: 9781307089585

Contents

International Financial Management - Accounting and Management Control 1

1. Worldwide Accounting Diversity 3
2. Analysis of Foreign Financial Statements 46
3. Additional Financial Reporting Issues 96
4. International Transfer Pricing 140
5. Strategic Accounting Issues in Multinational Corporations 175
6. International Corporate Social Reporting 229
International Financial Management - Financial Management 263
7. Globalization and the Multinational Firm 264
8. The Market for Foreign Exchange 288
9. International Parity Relationships and Forecasting Foreign Exchange Rates 316
10. International Capital Structure and the Cost of Capital 349
11. Management of Transaction Exposure 376
12. Management of Economic Exposure 403
13. Management of Translation Exposure 422

•••
Ill
 Credits

International Financial Management - Accounting and Management Control 1

1. Worldwide Accounting Diversity: Chapter 2 from International Accounting, Fourth Edition by Doupnik,
Perera, 2015 3
2. Analysis of Foreign Financial Statements: Chapter 10 from International Accounting, Fourth Edition by
Doupnik, Perera, 2015 46
3. Additional Financial Reporting Issues: Chapter 9 from International Accounting, Fourth Edition by
Doupnik, Perera, 2015 96
4. International Transfer Pricing: Chapter 12 from International Accounting, Fourth Edition by Doupnik,
Perera, 2015 140
5. Strategic Accounting Issues in Multinational Corporations: Chapter 13 from International Accounting,
Fourth Edition by Doupnik, Perera, 2015 175
6. International Corporate Social Reporting: Chapter 15 from International Accounting, Fourth Edition by
Doupnik, Perera, 2015 229

International Financial Management - Financial Management 263

7. Globalization and the Multinational Firm: Chapter 1 from International Financial Management, Eighth
Edition by Eun, Resnick, 2018 264
8. The Market for Foreign Exchange: Chapter 5 from International Financial Management, Eighth Edition
by Eun, Resnick, 2018 288
9. International Parity Relationships and Forecasting Foreign Exchange Rates: Chapter 6 from
International Financial Management, Eighth Edition by Eun, Resnick, 2018 316
10. International Capital Structure and the Cost of Capital: Chapter 17 from International Financial
Management, Eighth Edition by Eun, Resnick, 2018 349
11. Management of Transaction Exposure: Chapter 8 from International Financial Management, Eighth
Edition by Eun, Resnick, 2018 376
12. Management of Economic Exposure: Chapter 9 from International Financial Management, Eighth
Edition by Eun, Resnick, 2018 403
13. Management of Translation Exposure: Chapter 10 from International Financial Management, Eighth
Edition by Eun, Resnick, 2018 422

•
IV
 1

International Financial
Management - Accounting
and Management Control
 Internationa l Accounting, Fourth Edition 3

Worldwide Accounting
Diversity
Learning Objectives
After reading this chapter, you should be able to

• Provide evidence of the diversity that exists in accounting internationally.

• Explain the problems caused by accounting diversity.
• Describe the major environmental factors that influence national accounting
systems and lead to accounting diversity.
• Describe a judgmental classification of countries by financial reporting system.
• Discuss the influence that culture is thought to have on financial reporting.
• Describe a simplified model of the reasons for international differences in financial
reporting.
• Categorize accounting differences internationally and provide examples of each
type of difference.

INTRODUCTION
Considerable differences exist across countries in the accounting treatment of
many items. For example, companies in the United States are not allowed to report
property, plant, and equipment at amounts greater than historical cost. In contrast,
companies in the European Union are allowed to report their assets on the balance
sheet at market values. Research and development costs must be expensed as
incurred in Japan, but development costs may be capitalized as an asset in Canada
and France. Chinese companies are required to use the direct method in preparing
the statement of cash flows, whereas most companies in the United States and
Europe use the indirect method.
Differences in accounting can result in significantly different amounts being re-
ported on the balance sheet and income statement. In its 2009 annual report, the
South Korean telecommunications firm SK Telecom Company Ltd. described 15
significant differences between South Korean and U.S. accounting rules. Under
South Korean generally accepted accounting principles (GAAP), SK Telecom re-
ported 2009 net income of 1,056 billion South Korean won (KRW). If SK Telecom
had used U.S. GAAP in 2009, its net income would have been KRW 1,357 bil-
lion, approximately 28 percent larger. 1 Shareholders' equity as stated under South

1
The largest adjustments related to "ret roact ive applicat ion of equity method on business combination"
and the recognition of gains on "cu rrency and interest rate swap."
23
4 International Financial Management

24 Chapter Two

Korean GAAP was KRW 12,345 billion but would have been KRW 14,261 billion
under U.S. GAAP, a 16 percent difference. Braskem SA, a Brazilian chemical com-
pany, made 13 adjustments in 2009 to its Brazilian GAAP net income to report net
income on a U.S. GAAP basis. These adjustments caused Brazilian GAAP income
of 767.8 million Brazilian reais (BRL) to decrease by 70 percent, to 232.7 million
reais under U.S. GAAP. Similarly, stockholders' equity of BRL 4,592.5 million on
a Brazilian GAAP basis decreased to only BRL 4,379.4 million under U.S. GAAP. 2
This chapter presents evidence of accounting diversity, explores the reasons for
that diversity, and describes the problems that are created by differences in ac-
counting practice across countries. Historically, several major models of account-
ing have been used internationally, with clusters of countries following them.
These also are described and compared in this chapter. We describe the poten-
tial impact that culture has had on the development of national accounting sys-
tems and present a simplified model of the reasons for international differences in
financial reporting.
The final section of this chapter uses excerpts from annual reports to present ad-
ditional examples of some of the differences in accounting that exist across coun-
tries. It should be noted that much of the accounting diversity that existed in the
past has been eliminated as countries have abandoned their local GAAP in favor
of International Financial Reporting Standards (IFRS) issued by the International
Accounting Standards Board (IASB). This chapter provides a historical perspec-
tive on accounting diversity that should allow readers to more fully appreciate the
harmonization and convergence efforts described in the next chapter.

EVIDENCE OF ACCOUNTING DIVERSITY

Exhibits 2.1 and 2.2 present consolidated balance sheets for the British company
Vodafone Group PLC and its U.S. competitor Verizon Communications Inc. A
quick examination of these statements shows several differences in format and ter-
minology between the United Kingdom and the United States. Perhaps the most
obvious difference is the order in which assets are presented. Whereas Verizon
presents assets in order of liquidity, beginning with cash and cash equivalents,
Vodafone presents assets in reverse order of liquidity, starting with goodwill. On
the other side of the balance sheet, Vodafone presents its equity accounts before
liabilities. In the equity section, "Called-up share capital" is the equivalent of the
common stock account on a U.S. balance sheet, and "Share premium account" is
the contributed capital in excess of par value. Vodafone uses a "Capital redemp-
tion reserve" to indicate an appropriation of retained earnings. Reserves are un-
known in the United States. Vodafone includes "Provisions," which represent
estimated liabilities related to restructurings, legal disputes, and asset retirements,
in both current and noncurrent liabilities. This line item does not appear in the U.S.
balance sheet.
Common for U.S. companies, Verizon includes only consolidated financial
statements in its annual report. In addition to consolidated financial statements,
Vodafone also includes the parent company's separate balance sheet in its an-
nual report. This is shown in Exhibit 2.3. In the parent company balance sheet,
investments in subsidiaries are not consolidated, but instead are reported as

2
The largest difference in stockholders' equity stems from a diff erence in the accounting treatment for
distributions to shareholders.
 International Accounting, Fourth Edition s

Worldwide Accounting Diversity 25

EXHIBIT 2.1 VODAFONE GROUP PLC

Consolidated Balance Sheets

Consolidated Balance Sheet at 31 March

2009 2008
Note £m fm
Noncurrent assets
Goodwill ........................ . ........ .. . 9 53,958 51,336
Other intangible assets .............. . ........ .. . 9 20,980 18,995
Property, plant and equipment ................. .. . 11 19,250 16,735
Invest ments in associated undertakings .......... .. . 14 34,715 22,545
Other investments ................. . ........ .. . 15 7,060 7,367
Deferred t ax assets ................. . ........ .. . 6 630 436
Postemployment benefits ............ . ........ .. . 26 8 65
Trade and ot her receivables .......... . ........ .. . 17 3,069 1,067
139,670 118,546
Current assets
Inventory ........................ . ........ .. . 16 412 417
Taxat ion recoverable ............... . ........ .. . 77 57
Trade and ot her receivables .......... . ........ .. . 17 7,662 6,551
Cash and cash equ ivalents ........... . ........ .. . 18 4,878 1,699
13,029 8,724
Total asset.s ................................ . 152,699 127,270

Equity
Called-up share capital .............. . ........ .. . 19 4,153 4, 182
Share premium account ............. . ........ .. . 21 43,008 42,934
Own shares held .................. . ........ .. . 21 {8,036) (7,856)
Add itional paid-in capital ............ . ........ .. . 21 100,239 100, 151
Capital redemption reserve .................... . . 21 10,101 10,054
Accumulated ot her recognised income and expense . . . 22 20,517 10,558
Retained losses .............................. . 23 {83,820) (81,980)
Total equity shareholders' funds . .............. . 86,162 78,043
Minority interests ........................... . 1,787 1, 168
Written put options over minority interests........ .. . (3,172) (2,740)
Total minority interests ...................... . {1,385) {1,572)
Total equity ................................ . 84,777 76,471
Noncurrent liabilities
Long-term borrowings .............. . ........ .. . 25 31,749 22,662
Deferred t ax liabilities ............... . ........ .. . 6 6,642 5, 109
Postemployment benefits ............ . ........ .. . 26 240 104
Prov1s1ons ........................ . ........ .. . 27 533 306
Trade and ot her payables ............ . ........ .. . 28 811 645
39,975 28,826
Current liabilities
Short-t erm borrowings .............. . ........ .. . 25,35 9,624 4,532
Current taxation liabilities ........... . ........ .. . 4,552 5, 123
Prov1s1ons ........................ . ........ .. . 27 373 356
Trade and ot her payables ............ . ........ .. . 28 13,398 11,962
27,947 21,973
Total equity and liabilities .................... . 152,699 127,270
6 International Financial Management

26 Chapt er Two

EXHIBIT 2.2
VERIZON COMMUINICATIONS, INC.
Consolidated Balance Sheets

At December 31 (Dollars in Millions, Except per Share Amounts) ....... .. ........ .. ... . 2009 2008
Assets
Current assets
Cash and cash equivalents .. . ......... . ........ .. ............. .. ........ .. ... . $ 2,009 $ 9,782
Short -term invest ments ...................................... .. ........ .. ... . 490 509
Accounts receivable, net of allowances of $976 and $941 ............ .. ........ .. ... . 12,573 11,703
Inventories ................................................ .. ........ .. ... . 2,289 2,092
Prepaid expenses and other ........... . ........ .. ............. .. ........ .. ... . 5,247 1,989
Total current assets . .................................. ,.................... . 22,608 26,075
Plant, property, and equipment ........ . ........ .. ............. .. ........ .. ... . 228,518 215,605
Less accumulated depreciation ......... . ........ .. ............. .. ........ .. ... . 137,052 129,059
91,466 86,546
Investments in unconsolidat ed businesses ......... .. ............. .. ........ .. ... . 3,535 3,393
W ireless licenses ......... . ......... . ........ .. ............. .. ........ .. ... . 72,067 61,974
Goodwill ......................... . ........ .. ............. .. ........ .. ... . 22,472 6,035
Other intangible assets, net ........... . ........ .. ............. .. ........ .. ... . 6,764 5, 199
Other investments ........ . ......... . ........ .. ............. .. ........ .. ... . 4,781
Other assets ... .. ........ . ......... . ........ .. ............. .. ........ .. ... . 8,339 8,349
Total assets ......................................... ,.................... . $227,251 $202,352
Liabilities and Shareowners' Investment
Current liabilities
Debt mat uring wit hin one year ........ . ........ .. ............. .. ........ .. ... . $ 7,205 $ 4,993
Accounts payable and accrued liabilit ies .. . ........ .. ............. .. ........ .. ... . 15,223 13,814
Other .................. . ......... . ........ .. ............. .. ........ .. ... . 6,708 7,099
Total current liabilities ................................ ,.................... . 29,136 25,906
Long-t erm debt .................... . ........ .. ............. .. ........ .. ... . 55,051 46,959
Employee benefit obligat ions .......... . ........ .. ............. .. ........ .. ... . 32,622 32,5 12
Deferred income taxes ..... . ......... . ........ .. ............. .. ........ .. ... . 19,310 11,769
Other liabilities .. . ........ . ......... . ........ .. ............. .. ........ .. ... . 6,765 6,301
Equity
Series preferred stock ($. 10 par value; none issued) ........................... .. ... .
Common st ock ($.10 par value; 2,967,610, 119 shares issued in both periods) ....... .. ... . 297 297
Contributed capital .......................... .. ............. .. ........ .. ... . 40,108 40,291
Reinvest ed earnings ................. . ........ .. ............. .. ........ .. ... . 17,592 19,250
Accumulat ed ot her comprehensive loss {11,479) (13,372)
Common st ock in t reasury, at cost .............................. .. ........ .. ... . {5,000) (4,839)
Deferred compensat ion-employee stock ownership plans and ot her ... .. ........ .. ... . 88 79
Noncontrolling interest .............. . ....................... .. ........ .. ... . 42,761 37, 199
Total equity ......................................... ,.................... . 84,367 78,905
Total liabilities and equity ............................. ,.................... . $227,251 $202,3 52
 Internationa l Accounting, Fourth Edition 7

Worldwide Accounting Diversity 27

EXHIBIT 2.3 VODAFONE GROUP PLC

Company Balance Sheets

Company Balance Sheet at 31 March

2009 2008
Note £m fm
Fixed assets
Shares in group undertakings ......... . ........ .. ........ . 3 64,937 64,922

Current assets
Debtors: amounts falling due af1i:er more t han one year . . . . . . . . . 4 2,352 821
Debtors: amounts falling due w ithin one year . . . . . . . . . . . . . . . . 4 126,334 126,099
128,797 126,920
Cash at bank and in hand .............................. . 111
Creditors: amounts falling due within one year . . . . . . . . . . . 5 {92,339) (98,784)
Net current assets . .................................. . 36,458 28,136
Total assets less current liabilities ...................... . 101,395 93,058
Creditors: amounts falling due after more than one year.. . . 5 {21,970) (14,582)
79,425 78,476

Capital and reserves

Called-up share capital .............. . ........ .. ........ . 6 4,153 4,182
Share premium account ............. . ........ .. ........ . 8 43,008 42,934
Capit al redemption reserve ... . ....... . ........ .. ........ . 8 10,101 10,054
Capital reserve ..... . .............. . ........ .. ........ . 8 88 88
Other reserves ..... . .............. . ........ .. ........ . 8 957 942
Own shares held .................. . ........ .. ........ . 8 {8,053) (7,867)
Profit and loss account .............. . ........ .. ........ . 8 29,171 28,143
Equity shareholders' funds ........................... . 79,425 78,476

"Shares in group undertakings" in the "Fixed assets" section. Liabilities are called
"Creditors," and receivables are "Debtors." From the perspective of U.S. financial
reporting, the UK parent company balance sheet has an unusual structure. Rather
than the U.S. norm of Assets = Liabilities + Shareholders' equity, Vodafone's parent
company balance sheet is presented as Assets - Liabilities = Shareholders' equity.
Closer inspection shows that the balance sheet presents the left-hand side of the equa-
tion as Noncurrent assets+ Net current assets (or Working capital) - Noncurrent
liabilities = Shareholders' equity.
All of these superficial differences would probably cause a financial analyst
little problem in analyzing the company's financial statements. More important
than the format and terminology differences are the differences in recognition and
measurement rules employed to value assets and liabilities and to calculate in-
come. As was noted in the introduction to this chapter, very different amounts of
net income and stockholders' equity can be reported by a company depending on
the accounting rules that it uses. For example, SK Telecom's 2009 net income was
28 percent larger under U.S. GAAP than under South Korean GAAP; Braskem' s 2009
net income was 70 percent smaller under U.S. GAAP than under Brazilian GAAP.
8 International Financial Management

28 Chapter Two

REASONS FOR ACCOUNTING DIVERSITY

Why do financial reporting practices differ across countries? Accounting schol-
ars have hypothesized numerous influences on a country's accounting system,
including factors as varied as the nature of the political system, the stage of eco-
nomic development, and the state of accounting education and research. A survey
of the relevant literature has identified the follow ing five items as being commonly
accepted as factors influencing a country's financial reporting practices: (1) legal
system, (2) taxation, (3) providers of financing, (4) inflation, and (5) political and
economic ties.3

Legal System
There are two major types of legal systems used around the world: common law
and codified Roman law. Common law began in England and is primarily found
in the English-speaking countries of the world. Common law countries rely on
a limited amount of statute law, which is then interpreted by the courts. Court
decisions establish precedents., thereby developing case law that supplements the
statutes. A system of code law., followed in most non-English-speaking countries,
originated in the Roman jus civile and was developed further in European univer-
sities during the Middle Ages. Code law countries tend to have relatively more
statute or codified law governing a wider range of human activity.
What does a country's legal system have to do with accounting? Code law
countries generally have corporation law (sometimes called a commercial code
or companies act) that establishes the basic legal parameters governing business
enterprises. The corporation law often stipulates which financial statements must
be published in accordance with a prescribed format. Additional accounting mea-
surement and disclosure rules are included in an accounting law debated and
passed by the national legislature. In countries where accounting rules are legis-
lated, the accounting profession tends to have little influence on the development
of accounting standards. In countries with a tradition of common law, although a
corporation law laying the basic framework for accounting might exist (such as in
the United Kingdom), specific accounting rules are established by the profession
or by an independent nongovernmental body representing a variety of constitu-
encies. Thus, the type of legal system in a country tends to determine whether
the primary source of accounting rules is the government or a nongovernmental
organization.
In code law countries, the accounting law tends to be rather general, does not
provide much detail regarding specific accounting practices, and may provide no
guidance at all in certain areas. Germany is a good example of this type of coun-
try. The German accounting law passed in 1985 is only 47 pages long and is silent
with regard to issues such as leases, foreign currency translation, and cash flow
statements. 4 When no guidance is provided in the law, German companies refer
to other sources, including tax law, opinions of the German auditing profession,
and standards issued by the German Accounting Standards Committee, to decide
how to do their accounting. Interestingly enough, important sources of accounting
practice in Germany have been textbooks and commentaries w ritten by account-
ing academicians.

3
Gary K. Meek and Sharokh M. Saudagaran, "A Survey of Research on Financia l Reporting in a Transna-
tional Context," Journal of Accounting Literature, 1990, pp. 145-82.
4
Jermyn Paul Brooks and Dietz Mertin, Neues Deutsches Bilanzrecht (Dusseldorf: IDW-Verlag, 1986).
 Internationa l Accounting, Fourth Edition 9

Worldwide Accounting Diversity 29

In common law countries, where there is likely to be a nonlegislative organiza-

tion developing accounting standards, much more detailed rules are developed.
The extreme case might be the Financial Accounting Standards Board (FASB) in
the United States, which provides a substantial amount of implementation guid-
ance in its accounting standards codification (ASC) and updates and has been
accused of producing a "standards overload."
To illustrate this point, consider the rules related to accounting for leases es-
tablished by the FASB in the United States and in German accounting law. In the
United States, leases must be capitalized if any one of four very specific criteria
is met. Additional guidance establishes rules for specific situations, such as sales
with leasebacks, sales-type leases of real estate, and changes in leases resulting
from refundings of tax-exempt debt. In contrast, the German accounting law is si-
lent with regard to leases. The only guidance in the law can be found in paragraph
285, which simply states that all liabilities must be recorded. 5

Taxation
In some countries, published financial statements form the basis for taxation,
whereas in other countries, financial statements are adjusted for tax purposes and
submitted to the government separately from the reports sent to stockholders.
Continuing to focus on Germany, the so-called congruency principle (Massgeblich-
keitsprinzip) in that country stipulates that the published financial statements serve
as the basis for taxable income. 6 In most cases, for an expense to be deductible for
tax purposes, it must also be used in the calculation of financial statement income.
Well-managed German companies attempt to minimize income for tax purposes,
for example, through the use of accelerated depreciation, so as to reduce their tax
liability. As a result of the congruency principle, accelerated depreciation must
also be taken in the calculation of accounting income.
In the United States, in contrast, conformity between the tax statement and the
financial statements is required only with regard to the use of the last-in, first-out
(LIFO) inventory cost flow assumption. U.S. companies are allowed to use acceler-
ated depreciation for tax purposes and straight-line depreciation in the financial
statements. All else being equal, because of the influence of the congruency prin-
ciple, a German company is likely to report lower income than its U.S. counterpart.
The difference between tax and accounting income gives rise to the necessity
to account for deferred income taxes, a major issue in the United States in recent
years. Deferred income taxes are much less of an issue in Germany; for many
German companies, they do not exist at all. This is also true in other code law
countries such as France and Japan.

Providers of Financing
The major providers of financing for business enterprises are family members,
banks, governments, and shareholders. In those countries in which company
financing is dominated by families, banks, or the state, there will be less pressure
for public accountability and information disclosure. Banks and the state will often

5 In compliance w ith European Union regulations, Germany requires publicly traded companies to use
Internationa l Financial Reporting Standards (IFRS) to prepare their consol idated financial statements.
German accounting law continues to be used by privately held compan ies and by publicly traded
companies in preparing parent company financial statements.
6 German taxable income is computed by comparing an open ing and closing tax balance sheet, the
Steuerbilanz. The tax balance sheet is based on the published balance sheet, the Handelsbilanz.
10 International Financial Management

30 Chapter Two

be represented on the board of directors and will therefore be able to obtain infor-
mation necessary for decision making from inside the company. As companies
become more dependent on financing from the general populace through the pub-
lic offering of shares of stock, the demand for more information made available
outside the company becomes greater. It simply is not feasible for the company to
allow the hundreds, thousands, or hundreds of thousands of shareholders access
to internal accounting records. The information needs of those financial statement
users can be satisfied only through extensive disclosures in accounting reports.
There can also be a difference in financial statement orientation, with stockhold-
ers being more interested in profit (emphasis on the income statement) and banks
more interested in solvency and liquidity (emphasis on the balance sheet). Bankers
tend to prefer companies to practice rather conservative accounting with regard to
assets and liabilities.

Inflation
Countries experiencing chronic high rates of inflation have found it necessary to
adopt accounting rules that required the inflation adjustment of historical cost
amounts. This has been especially true in Latin America, which as a region has had
more inflation than any other part of the world. For example, throughout the 1980s
and 1990s, the average annual rate of inflation rate in Mexico was approximately
50 percent, with a high of 159 percent in 1987.7 Double- and triple-digit inflation
rates render historical costs meaningless. Throughout most of the latter half of
the 20th century, this factor primarily distinguished Latin America from the rest
of the world with regard to accounting.8 However, inflation has been successfully
brought under control in most countries, and this factor is no longer as important
in explaining accounting diversity as it once was.
Adjusting accounting records for inflation results in a write-up of assets and
therefore related depreciation and amortization expenses. Adjusting income for
inflation is especially important in those countries in which accounting state-
ments serve as the basis for taxation; otherwise, companies will be paying taxes on
fictitious profits.

Political and Economic Ties

Accounting is a technology that can be relatively easily borrowed from or imposed
on another country. Through political and economic links, accounting rules have
been conveyed from one country to another. For example, through previous colo-
nialism, both England and France have transferred their accounting frameworks
to a variety of countries around the world. British-style accounting systems can
be found in countries as far-flung as Australia and Zimbabwe. French accounting
is prevalent in the former French colonies of western Africa. More recently, it is
thought that economic ties with the United States have had an impact on account-
ing in Canada, Mexico, and Israel.

Correlation of Factors
Whether by coincidence or not, there is a high degree of correlation between legal
system, tax conformity, and source of financing. As Exhibit 2.4 shows, common
law countries tend to have greater numbers of domestic listed companies, relying
more heavily on equity as a source of capital. Code law countries tend to link taxa-
tion to accounting statements and rely less on financing provided by shareholders.
7Joseph B. Lipscomb and Harold Hunt, " Mexican Mortgages: Structure and Default Incentives, Historical
Simulation 1982-1998, " Journal of Housing Research 10, no. 2 (1999), pp. 235-65.
8
Mexico continued its use of inflation accounting until 2007.
 Internationa l Accounting, Fourth Edition 11

Worldwide Accounting Diversity 31

EXHIBIT 2.4 Domestic Listed Companies

Relationship
between Several Per Million of Tax
Factors Influencing Country Legal System Number Population Conformity
Accounting Italy Code 296 5.1 Yes
Diversity Germany Code 783 9.5 Yes
Sources: N umber of d omes- Japan Code 2,335 18.4 Yes
tic listed companies o btained United Kingdom Common 2,792 45.6 No
from World Fed eration of Australia Common 1,966 91.4 No
Exchanges (2009), www
.world-exchanges.org. Canada Common 3,700 109.6 No
Country popula tions
obtained from CIA World
Fact Book (2010).

PROBLEMS CAUSED BY ACCOUNTING DIVERSITY

Preparation of Consolidated Financial Statements

The diversity in accounting practice across countries causes problems that can be
quite serious for some parties. One problem relates to the preparation of consoli-
dated financial statements by companies with foreign operations. Consider Gen-
eral Motors Corporation, which has subsidiaries in more than 50 countries around
the world. Each subsidiary incorporated in the country in which it is located is
required to prepare financial statements in accordance with local regulations.
These regulations usually require companies to keep books in local currency using
local accounting principles. Thus, General Motors de Mexico prepares financial
statements in Mexican pesos using Mexican accounting rules, and General Motors
Japan Ltd. prepares financial statements in Japanese yen using Japanese standards.
To prepare consolidated financial statements in the United States, in addition to
translating the foreign currency financial statements into U.S. dollars, the parent
company must also convert the financial statements of its foreign operations into
U.S. GAAP. Either each foreign operation must maintain two sets of books prepared
in accordance with both local and U.S. GAAP or, as is more common, reconciliations
from local GAAP to U.S. GAAP must be made at the balance sheet date. In either
case, considerable effort and cost are involved; company personnel must develop
an expertise in more than one country's accounting standards.

Access to Foreign Capital Markets

A second problem caused by accounting diversity relates to companies gain-
ing access to foreign capital markets. If a company desires to obtain capital by
selling stock or borrowing money in a foreign country, it might be required to
present a set of financial statements prepared in accordance with the accounting
standards in the country in which the capital is being obtained. Consider the case
of the semiconductor manufacturer STMicroelectronics, which is based in Geneva,
Switzerland. The equity market in Switzerland is so small (there are fewer than
8 million Swiss) and ST's capital needs are so great that the company has found
it necessary to have its common shares listed on the Euronext-Paris and Borsa
ltaliana stock exchanges in Europe and on the New York Stock Exchange (NYSE)
in the United States. To have stock traded in the United States, foreign companies
must either prepare financial statements using U.S. accounting standards or provide
a reconciliation of local GAAP net income and stockholders' equity to U.S. GAAP.
12 International Financial Management

32 Chapter Two

This can be quite costly. In preparing for a New York Stock Exchange listing in
1993, the German automaker Daimler-Benz estimated it spent $60 million to ini-
tially prepare U.S. GAAP financial statements; it expected to spend $15 million
to $20 million each year thereafter.9 The appendix to this chapter describes the
case of Daimler-Benz in becoming the first German company to list on the NYSE.
As noted in Chapter 1, the U.S. SEC eliminated the U.S. GAAP reconciliation
requirement for those foreign companies using IFRS to prepare their financial
statements. However, foreign companies not using IFRS continue to need to
provide U.S. GAAP information.

Comparability of Financial Statements

A third problem relates to the lack of comparability of financial statements be-
tween companies from different countries. This can significantly affect the analy-
sis of foreign financial statements for making investment and lending decisions.
In 2003 alone, U.S. investors bought and sold nearly $3 trillion worth of foreign
stocks, while foreign investors traded over $6 trillion in U.S. equity securities. 10 In
recent years there has been an explosion in mutual funds that invest in the stock
of foreign companies. As an example, the number of international stock funds in-
creased from 123 in 1989 to 534 by the end of 1995.11 T. Rowe Price's New Asia
Fund, for example, invests exclusively in stocks and bonds of companies located
in Asian countries other than Japan. The job of deciding which foreign companies
to invest in is complicated by the fact that foreign companies use accounting rules
different from those used in the United States, and that those rules differ from
country to country. It is very difficult if not impossible for a potential investor to
directly compare the financial position and performance of an automobile manu-
facturer in Germany (Volkswagen), Japan (Nissan), and the United States (Ford)
because these three countries have different financial accounting and reporting
standards. According to Ralph E. Walters, former chairman of the steering com-
mittee of the International Accounting Standards Committee, "either international
investors have to be extremely knowledgeable about multiple reporting methods
or they have to be willing to take greater risk." 12
A lack of comparability of financial statements also can have an adverse effect
on corporations when making foreign acquisition decisions. As a case in point,
consider the experience of foreign investors in Eastern Europe. After the fall of the
Berlin Wall in 1989, Western companies were invited to acquire new ly privatized
companies in Poland, Hungary, and other countries in the former communist bloc.
The concepts of profit and accounting for assets in those countries under com-
munism were so different from accounting practice in the West that most Western
investors found financial statements useless in helping to determine which enter-
prises were the most attractive acquisition targets. In many cases, the international
public accounting firms were called on to convert financial statements to a Western
basis before acquisition of a company could be seriously considered.

9Allan B. Afterman, International Accounting, Financial Reporting, and Analysis (New York: Warren,
Gorham & Lamont, 1995), pp. C1-17, C1-22.
10U.S. Department of Commerce, Bu reau of Economic Analysis, "U.S. International Transactions," Survey
of Current Business, January 2005, pp. 45-76, Table 7a.
11
James L. Cochrane, James E. Shapiro, and Jean E. Tobin, "Foreign Equities and U.S. Investors: Breaking
Down t he Barriers Separating Supply and Demand," NYSE Working Paper 95-04, 1995.
12 Stephen H. Coll ins, "The Move to Globalization, " Journal of Accountancy, March 1989, p. 82.
 Internationa l Accounting, Fourth Edition 13

Worldwide Accounting Diversity 33

There was a very good reason why accounting in the communist countries
of Eastern Europe and the Soviet Union was so much different from accounting
in capitalist countries. Financial statements were not prepared for the benefit of
investors and creditors to be used in making investment and lending decisions.
Instead, financial statements were prepared to provide the government with in-
formation to determine whether the central economic plan was being fulfilled.
Financial statements prepared for central planning purposes have limited value in
making investment decisions.

Lack of High-Quality Accounting Information

A fourth problem associated with accounting diversity is the lack of high-quality
accounting standards in some parts of the world. There is general agreement that
the failure of many banks in the 1997 East Asian financial crisis was due to three
factors: a highly leveraged corporate sector, the private sector's reliance on foreign
currency debt, and a lack of accounting transparency. 13 To be sure, inadequate dis-
closure did not create the East Asian meltdown, but it did contribute to the depth
and breadth of the crisis. As Rahman explains: "It is a known fact that the very
threat of disclosure influences behavior and improves management, particularly
risk management. It seems that the lack of appropriate disclosure requirements
indirectly contributed to the deficient internal controls and imprudent risk man-
agement practices of the corporations and banks in the crisis-hit countries." 14 In-
ternational investors and creditors were unable to adequately assess risk because
financial statements did not reflect the extent of risk exposure due to the following
disclosure deficiencies:
• The actual magnitude of debt was hidden by undisclosed related-party transac-
tions and off-balance-sheet financing.
• High levels of exposure to foreign exchange risk were not evident.
• Information on the extent to which investments and loans were made in highly
speculative assets (such as real estate) was not available.
• Contingent liabilities for guaranteeing loans, often foreign currency loans, were
not reported.
• Appropriate disclosures regarding loan loss provisions were not made.
Because of the problems associated with worldwide accounting diversity,
attempts to reduce the accounting differences across countries have been ongoing
for over three decades. This process is known as harmonization. The ultimate goal
of harmonization is to have one set of international accounting standards that are
followed by all companies around the world. Harmonization is the major topic of
Chapter 3.

ACCOUNTING CLUSTERS
Given the discussion regarding factors influencing accounting practice worldwide,
it should not be surprising to learn that there are clusters of countries that share a
common accounting orientation and practices. One classification scheme identifies
three major accounting models: the Fair Presentation/Full Disclosure Model, the

13M. Zubaidur Rahman, " The Role of Accounting in the East Asian Financial Crisis: Lessons Learned?,"
Transnational Corporations 7, no. 3 (December 1998), pp. 1-52.
14
Ibid., p. 7.
Another Random Scribd Document
with Unrelated Content
 Pe ἢ a 4 j SUMMARY AND ASPECTS. 41 prose. Most Greek
prose, it must always be remembered, was originally intended for
the ear rather than for the eye; and in later times, when he could no
longer listen to the author’s voice, the lover of literature employed a
skilled anagnostes to read to him. Modern scholars, distressed by
the minute analysis to which the Graeco-Roman critics subjected the
charms of literary style, have exclaimed that we would willingly, if we
could, “attribute all the minute analysis of sentences in Greek
orations to the barren subtlety of the rhetors of Roman times, and
believe that the old orators scorned to compose in gyves and fetters,
and study the syllables of their periods, and the prosody of them, as
if they were writing poetry” But, surely, we never feel, to take the
case of poetry itself, that the genius of Shakespeare was straitened
because he wrote in verse; nor do we find it easier to believe that
the mastery (δεινότης) of Demosthenes was the less because it
embraced at once form and substance, manner and matter.
Sovereign artists find their best opportunity in the so-called
restraints of form; they move most freely within the bounds of law.
It may be, however, that the rhetoricians themselves are somewhat
to blame for this prejudice; in their zeal to unlock the secrets of
literary expression they sometimes seem to ignore the difference
between the methods by which the artist composes and the analyst
decomposes, between the method of life and the method of
dissolution, between creative fire and cold criticism. They seem
sometimes almost to suggest that a work of genius might be
produced by the careful observance of their rules. They forget that a
great writer passes rapidly and almost unconsciously through the
stages of instinct, habit, and art. In a sense he absorbs all
processes, and is modest enough to remember that there is withal
an element of happy chance in composition,—that “skill is in love
with luck, and luck with skill *.” 1 Mahaffy, Classical Greek Literature,
ii. p. 192. 2 Agathon’s line τέχνη τύχην ἔστερξε καὶ τύχη τέχνην (cp.
Fournal of Hellenic Studies, xx. 46). Aristotle is fond of quoting from
Agathon lines showing the part played by τύχη in human action. Cp.
7. by. ii. 3.
 42 INTRODUCTION. Granted, however, that the Graeco-
Roman rhetoricians sometimes magnify their calling unduly, our debt
remains great to such a writer as Dionysius for his attempt in the De
Compositione Verborum to analyse the appeal made to the emotions
by beautiful words harmoniously arranged. He discloses many
beauties which would otherwise have been lost upon modern
readers, and we cannot fail to endorse his assertion that care for the
minutest details of eloquence could not be below the dignity even of
a Demosthenes}. Dionysius himself had, no doubt, a constructive
aim in his analysis of the great writings of the past. He was a
believer in imzttation (μίμησις), and holds up Demosthenes as a
model, pointing out that Demosthenes in his turn had imitated
Thucydides. No higher standard than the Demosthenic could have
been chosen ; and the effect of Dionysius’ advocacy on the Greek
writing of his own time cannot have been other than good. In
contemporary Latin literature, imitation of Greek and early Roman
writers was also much in vogue ; and the Greek influence purified
Roman taste, though 1 Dionys. Hal. de Comp. Verb. c. 25; cp. Cic.
Ovator, 140 ff.—The value of the kind of verbal analysis offered by
Dionysius might be illustrated by a somewhat similar analysis of
Virgil's line ¢endebantqgue manus ripae ulterioris amore in Mr A. C.
Bradley’s recent Inaugural Lecture on Poetry for Poetry’s Sake, p. 25:
“ But I can see this much, that the translation (sc. ‘and were
stretching forth their hands in longing for the further bank’) conveys
a far less vivid picture of the outstretched hands and of their
remaining outstretched, and a far less poignant sense of the shore
and the longing of the souls. And it does so partly because this
picture and this sense are conveyed not only by the obvious
meaning of the words, but through the long-drawn sound of
‘tendebantque,’ through the time occupied by the five’ syllables and
therefore by the idea of ‘ulterioris,’ and through the identity of the
long sound ‘or’ in the penultimate syllables of ‘ulterioris amore’—all
this, and much more, apprehended not in this analytical fashion, nor
as added to the beauty of mere sound and to the obvious meaning,
but in unity with them and so as expressive of the poetic meaning of
the whole.” Such analysis as this will, in many minds, quicken the
sense of beauty; and in so doing it will surely justify itself, even to
those who least like to see the secrets of literary beauty
investigated. It is in the best sense educative, and so is a similar
analysis of other Virgilian lines in Mr Courthope’s Life zn Poetry: Law
in Taste, p. 72. Cp. the chapter on the ** Style of Milton: Metre and
Diction” in Mr Walter Raleigh’s essay on AZi/ton. 2 Dionys. Hal. de
Thucyd. c. 53.—The De Zlocutione presupposes the habit of
imitation, but it does not often refer directly to it, though in §§ 112,
113 the practice of Herodotus and Thucydides, as imitators, is
contrasted.
 ᾿ ae a ey ο SUMMARY AND ASPECTS. 43 it may have
tended to stifle originality and to discourage independence. In the
so-called ‘classical’ criticism of the sixteenth, seventeenth, and
eighteenth centuries of our own era, it was perhaps from Horace
more directly than from Dionysius that the idea of zmztation was
derived. And in our own generation R. L. Stevenson, who (with no
direct knowledge of the Greek critic) has analysed style in a manner
very similar to that of Dionysius, has left it on record that he “played
the sedulous ape,” when training himself to write’. The great use of
the imitation of masterpieces is that it gives a young writer hints in
craftsmanship and reveals to him hidden beauties in his models; if
carried to excess and allowed to check spontaneity and impair
sincerity, it is fatal to all true style. The subject of English prose style
has been treated in recent years not only by R. L. Stevenson, but by
writers as various as Walter Pater (Appreciations, pp. 1—36), Walter
Raleigh (Szy/e), Herbert Spencer (Philosophy of Style), J. Earle
(English Prose, pp. 334—368), “G. Saintsbury (Specimens of English
Prose Style, pp. xv.—xlv.), and J. A. Symonds (Essays Speculative
and Suggestive, i. pp. 256—331 and 11. I—29)*. A glance at these
English books on style, and still more at French manuals of
composition such as that of Géruzez or German treatises like
Gerber’s Die Sprache als Kunst, will show how much of the old
classification and terminology still remains,—‘figures of thought,’
‘figures of speech,’ ‘period,’ and the like*. Some ancient excesses,
such as the application of the term figures of speech to words like
‘iamiam” and 1 For Stevenson’s own description of his early habits of
imitation, reference may be made to Graham Balfour’s Life of Robert
Louis Stevenson, vol. i. p. 200. Stevenson’s essay on Some Technical
Elements of Style in Literature will be found in his Miscedlanies, iii.
pp. 236—261 (Edinburgh edition): ‘it is a singularly suggestive
inquiry into a subject which has always been considered too vague
and difficult for analysis, at any rate since the days of the classical
writers on rhetoric, whom Stevenson had never read” (2772, ii. p.
11). 2 To this list may be added the introductory notices in the five
volumes of Craik’s Znglish Prose Selections. 3 Period, colon, and
comma with a change of meaning now do duty for terms of
punctuation.
 44 INTRODUCTION. ‘liberum, have—it is to be hoped—
disappeared, leaving only what has been proved by experience to be
of permanent utility. Thus restrained, the ancient doctrine of tropes
and figures remains the basis of the modern. And _ the four,
Demetrian types of style seem to be regarded as a . _ useful division
for modern purposes, since in English poetry SZ “the elevated style
can be freely illustrated from Milton, the ~ graceful from Tennyson,
the’, forcible from Shakespeare, the simple from Wordsworth?, But
though much of the ancient doctrine survives, there are (in almost
every country except the United States of America) some signs of
failing interest in the subject generally. In France, the country of
great prose, rhetoric and style have always been carefully studied,
thanks largely to the long tradition which linked the schools of Lyons
and Bordeaux with the teaching of Quintilian®*, And yet, even in
France, the study is said to be declining ; and so rhetoric, which in
ancient times was widely cultivated -ὀὉὌὉΟἋΙ.. 1 Wilhelm Scherer
(Poetik, p. 50): *‘Die (antike) Rhetorik hat ferner fiir die Lehre vom
Ausdruck die Classification der Tropen und Figuren so reich
ausgebildet, dass die ganze Folgezeit nichts hinzufiigte.”—For
‘iamiam’ and ‘liberum’ as figures of speech, cp. Quintil. ix. 1, 16; and
for ‘dead figures of speech,’ see J. P. Postgate’s > Preface, p. xxx. to
Mrs Cust’s translation of Bréal’s Essai de Sémantique. 2 Cp. Abbott
and Seeley’s Zuglish Lessons for English People, pp. 69—86, where
these divisions are adopted and illustrations given from the poets
mentioned above.—It might be interesting to ask what estimate an
ancient Greek critic would have formed of such lines as Browning’s in
Pippa Passes :— God’s in his heaven— All’s right with the world! He
would probably have decided that they lacked μεγαλοπρέπεια (cp. π.
ἑρμ. § 5), for an example of which he might point to Sophocles’
rendering of the same idea :-— θάρσει μοι, θάρσει, τέκνον" ἔτι
μέγας οὐρανῷ Ζεύς, ὃς ἐφορᾷ πάντα καὶ κρατύνει. (Soph. Z/. 174.)
Browning’s lines he would presumably refer to the χαρακτὴρ ἰσχνός
and praise them if he regarded them as dramatically or otherwise
appropriate (cp. Cassio’s ‘‘ Well: God’s above all,” O¢hello, ii. 3). The
author of the περὶ “Epunvelas at all events, with his liking for familiar
proverbs, would look with favour on a literary style that was in close
touch with the spoken language. 3 Quintilian was of Spanish origin.
His name, like that of the Gaul Marcus Aper in the Dialogus de
Oratoribus, suggests the start which the Latin races, as compared
with the Teutonic, were to have in the field of rhetoric or literary
criticism.
 eee μὰ Poe ee SUMMARY AND ASPECTS. 45 and in the
middle ages was one of the subjects of the ¢rivium, is being
threatened in her great modern stronghold. All the more reason that
other countries, if they hold the view that to write one’s own
language correctly and beautifully is no small part of a true
patriotism, should be ready to learn from the lessons of the past}.
One of these lessons is the perennial nature of the antithesis,
Aszanism and Atticism, a reference to which may fitly conclude this
part of the Introduction. ‘Asianism’ and ‘Atticism’ are, it must be
admitted, difficult expressions to define exactly. But certain passages
of Cicero, Dionysius, and Quintilian, sufficiently indicate the historical
origin of the term Aszanism, and the general tendencies which it and
Atticism embodied in the opinion of critics well qualified to judge. In
the Srutus, Cicero describes eloquence (at the end of the Attic
period) as setting sail from the Piraeus, and then passing through
the islands of the Φέρει and traversing the whole of Asia, sullying
herself on the way with foreign fashions, losing her sound and
wholesome Attic style, and almost unlearning her native language*.
In the same way Dionysius dates the decline of the ‘ancient and
philosophic rhetoric’ from the death of Alexander of Macedon, and
vividly depicts the scandalous ways of the meretricious rhetoric
which had usurped its place’. Quintilian, again, 1 Gerald of Wales,
writing at the beginning of the thirteenth century and lamenting the
low ebb to which letters had sunk in England, seems (as far as can
be judged from his fragmentary text and from subsequent
references to his views) to have laid stress on the importance of
‘‘recte lepide ornate loqui,” and to have recommended training ‘“‘non
solum in trivio, verum etiam in authoribus et philosophis”’ (Brewer,
Giraldi Cambrensts Opera, iv. pp. 7, 8). 2 The difficulty is noticed by
Wilamowitz-Moellendorff in his paper on Asianismus und Atticismus
(Hermes, xxxv. 1 ff.). The recent literature of the subject is reviewed
by Ammon in Bursian’s Fahresbericht tiber die Fortschritte der
classischen Altertumswissenschaft, xxviii. 2, pp. 206—211. 8 Cic.
Brut. 51: ‘nam semel e Piraeo eloquentia evecta est, omnes
peragravit insulas atque ita peregrinata tota Asia est, ut se externis
oblineret moribus omnemque illam salubritatem Atticae dictionis et
quasi sanitatem perderet ac loqui paene dedisceret.” 4 Dionys. Hal.
de Antig. Orat.c. 1: cp. D. H. pp. 43, 44.—The controversy is not
mentioned in the 7. épu., which however seeks its models in the best
Attic writers.
 46 INTRODUCTION. remarks that Asiatic oratory lacked
judgment-and restraint ; that, whereas Attic taste and refinement
could not endure -an idle redundancy, the Asiatics carried their
innate vanity and bombast into the domain of eloquence’. Atticism
may, therefore, be regarded, from the standpoint of the Graeco-
Roman critics, as a reversion to the classical models, and Asianism
as a literary degeneracy showing itself chiefly, but not entirely, in the
use of excessive ornament. It was, above all, in the want of the Attic
sense of measure and fitness that Asianism declared itself. Among
the Attic writers we find examples of the stately as well as of the
plain style; among the Asiatic writers, emulators of the plain style as
well as of the stately. But among the latter the Attic taste is wanting
; and this makes all the difference*. They made no attempt to
preserve that taste through constant contact with the Attic
masterpieces, or through the study of rhetoric as an art rather than
as simple declamation. In Latin literature of almost every period
Asianism had its advocates and representatives. This is also true of
Atticism, which readily commended itself to the severity of taste so
characteristic of the Roman character. It is, indeed, to the ruling
classes of Rome that Dionysius ascribes the 1 Quintil. 2,752. Or. viii.
prooem. 17: ‘‘his (sc. Asianis) iudicium in eloquendo ac modus
(defuit)”; zdzd. xii. 10,17: ‘‘quod Attici limati quidam et emuncti nihil
inane aut redundans ferebant, Asiana gens tumidior alioqui atque
iactantior vaniore . etiam dicendi gloria inflata est.” 2 Quintil. xii. 10,
20 has well marked the essential unity underlying the individual
differences of the Attic writers: ‘‘nemo igitur dubitaverit, longe esse
optimum genus Atticorum. in quo ut est aliquid inter ipsos
commune, id est iudicium acre tersumque: ita ingeniorum plurimae
formae. quapropter mihi falli multum videntur, qui solos esse Atticos
credunt tenues et lucidos et significantes et quadam eloquentiae
frugalitate contentos ac semper manum intra pallium continentes.
nam quis erit hic Atticus? sit Lysias; hunc enim amplectuntur
amatores istius nominis modum.”—After mentioning in this way
Isocrates, Antiphon, Isaeus and others, Quintilian proceeds: ‘‘quid
denique Demosthenes? non cunctos illos tenues et circumspectos vi,
sublimitate, impetu, cultu, compositione superavit? non insurgit
locis? non figuris gaudet? non translationibus nitet? non oratione
ficta dat tacentibus vocem? non illud iusiurandum per caesos in
Marathone ac Salamine propugnatores rei publicae satis manifesto
docet, praeceptorem eius Platonem fuisse? quem ipsum num
Asianum appellamus plerumque instinctis divino spiritu vatibus
comparandum?”
 SUMMARY AND ASPECTS. 47 triumph which Atticism
seemed to have won in his own day’. Cicero, whether through the
influence of his Rhodian training or through his own instinctive
perception of oratorical effect, was no extreme adherent of the Attic
school. He cannot have failed, though he nowhere expressly assigns
this reason, to recognise that the style of such a writer as Lysias
would be out of harmony with the genius of Latin, a language in
which (owing to its comparatively limited resources) simplicity is apt
to end in baldness. It was rather in the rich periods of Isocrates that
Cicero found his model for that Latin rhetoric which writers of
modern Europe have so often imitated; and it is therefore not easy
to exaggerate the influence of this Attic orator upon the
development of artistic prose. And if this be true of Isocrates, it
applies to his master Gorgias. There is, in truth, something strangely
fascinating in the lasting and prolific energy of these two indomitable
old men. As was pointed out earlier in this introduction, Gorgias may
well be considered the founder of artistic prose. It is true that his
love of the figures, and of other ornaments of style, sometimes led
him into extravagance and fine writing, and caused his name to be
coupled in antiquity with that of Hegesias, the supposed founder of
Asianism*. Nevertheless it was a great achievement to establish the
doctrine that prose no less than poetry should be artistic. Only at a
comparatively recent stage of modern literary criticism was it
recognised that the //ad and the Odyssey are not ‘natural’ poetry but
artificial in the highest degree. Gorgias no doubt saw this, as did
Dionysius at a later time; and he would have perceived no less
clearly that the simplicity of such prose as that of Lysias was not
natural but the result of art,—was, in fact, a studied simplicity.
Personally Gorgias is an excellent type of that daring and exuberant
vigour which languages no less than nations need if they are
perpetually to renew their youth. He lived to a ripe old age,
attributing (it is said) his longevity to the D. H. pp. 34» 35: 2 See σ΄.
ty. iii. 2.
 48 INTRODUCTION. fact that he had never given the rein
to the lower pleasures '. In his style he would seem to have
remained always youthful, and thus to have incurred the reproach
which later critics intended to convey by the terms μειρακιεύεσθαι
and veawever Oat. | His pupil Isocrates, on the other hand,
illustrates the usual rule that with added years there comes a more
subdued beauty of style% Two great admirers of Isocrates in later
days, a Roman master of style and a Greek critic, have recognised to
the full the part played in the formation of style by the ardour of
youth. Jz the young orator I would welcome a luxuriant opulence,
says Cicero, when describing the early efforts of Sulpicius* Every
youthful heart 1 Cp. T.G. Tucker (Classical Review, xiv. 247) on a
‘Saying of Gorgias,’ where the reference is to Plutarch de Glor. Athen.
5. 2 Cic. Ov. 176: ‘*Gorgias autem avidior est generis eius et his
festivitatibus— sic enim ipse censet—insolentius abutitur; quas
Isocrates, cum tamen audivisset in Thessalia adulescens senem iam
Gorgiam, moderatius etiam temperavit; quin etiam se ipse tantum,
quantum aetate procedebat—prope enim centum confecit annos—
relaxarat a nimia necessitate numerorum; quod declarat in eo libro,
quem ad Philippum Macedonem scripsit, cum iam admodum esset
senex; in quo dicit sese minus iam servire numeris quam solitus
esset.” The reference here is to Isocr. Phil. 27, οὐδὲ yap ταῖς περὶ τὴν
λέξιν εὐρυθμίαις καὶ ποικιλίαις κεκοσμήκαμεν αὐτόν, αἷς αὐτός τε
νεώτερος ὧν ἐχρώμην καὶ τοῖς ἄλλοις ὑπέδειξα, δι ὧν τοὺς λόγους
ἡδίους ἂν ἅμα καὶ πιστοτέρους ποιοῖεν. ὧν οὐδὲν ἔτι δύναμαι διὰ τὴν
ἡλικίαν. These words would be written when Isocrates was go... In
his Panathenaicus (aet. 98) he writes: νεώτερος μὲν ὧὦν...περὶ
ἐκείνους (τοὺς λόγους) ἐπραγματευόμην τοὺς περὶ τῶν
συμφερόντων τῇ τε πόλει καὶ τοῖς ἄλλοις “Ἑλλησι συμβουλεύοντας,
καὶ πολλῶν μὲν ἐνθυμημάτων γέμοντας, οὐκ ὀλίγων δ᾽ ἀντιθέσεων
καὶ παρισώσεων καὶ τῶν ἄλλων ἰδεῶν τῶν ἐν ταῖς ῥητορείαις
διαλαμπουσῶν καὶ τοὺς ἀκούοντας ἐπισημαίνεσθαι καὶ θορυβεῖν
ἀναγκαζουσῶν (Isocr. Panath.1,2). The ‘old man eloquent,’ therefore,
like Milton himself, cultivated greater austerity in his later years (for
Milton in this regard, cp. Seeley Lectures and Essays p. 144). Milton
threw off, in particular, that ‘troublesome and modern bondage of
riming,’ the connexion of which with the ‘figure’ ὁμοιοτέλευτον has
been so well traced in Norden’s Kumstprosa (ii. 810 ff.). 3 Cic. de
Orat. ii. 21, 88 (Antonius loquitur), ‘atque ut a familiari nostro
exordiar, hunc ego, Catule, Sulpicium primum in causa parvula
adulescentulum audivi, voce et forma et motu corporis et reliquis
rebus aptis ad hoc munus, de quo quaerimus, oratione autem celeri
et concitata, quod erat ingenii, et verbis effervescentibus et paulo
nimium redundantibus, quod erat aetatis. Non sum aspernatus; volo
enim se efferat in adulescente fecunditas; nam sicut facilius in
vitibus revocantur ea, quae sese nimium profuderunt, quam, si nihil
valet materies, nova sarmenta cultura excitantur, item volo esse in
adulescente, unde aliquid amputem ; non enim potest in eo esse
sucus diuturnus, quod nimis celeriter est maturitatem
 Seen = oe ee λυ ΣΝ Mtoe Sin ih i Cent? Sy “—— Et, τ a νυ
ἡ ee a a θεν DATE AND AUTHORSHIP. 49 passionately pursues
beauty of style, says Dionysius, when he offers his Arrangement of
Words to the young Melitius Rufus as a birthday gift. Yet no two
writers have shown more plainly, in their rhetorical teaching, how
great is the need of discipline, if style is to be not only ardent, but
simple, strong, and beautifully clear. C. DATE AND AUTHORSHIP OF
THE DE ELOCUTIONE. For more than one reason it has seemed best
to give some account of the subject-matter of the De E/locutione,
and of other similar treatises on prose style, before discussing the
difficult question of its date and authorship. Where possible, it is as
well not to start with that note of scepticism which is so
characteristic of modern scholarship, but rather first of all to
suggest, independently of disputed points, the literary value and
permanent interest of the work in question. The course here taken
has this further advantage that the internal evidence with regard to
the date and authorship of the De Elocutione can now be considered
in the light of the historical sketch already given. And in this, as in so
many similar cases, it is the internal evidence that requires the most
detailed treatment. I. INTERNAL EVIDENCE. Reserving for the
present the discussion of the external evidence, which is of a
precarious kind, we may ask what opinion we could have formed, on
purely internal grounds, as to the date of the treatise, if it had come
down to us adsecutum.’ Cp. Brut. 91, 316, ‘quibus non contentus
Rhodum veni meque ad eundem, quem Romae audiveram, Molonem
applicavi cum actorem in veris causis scriptoremque praestantem,
tum in notandis animadvertendisque vitiis et instituendo docendoque
prudentissimum. is dedit operam—si modo id consequi potuit—, ut
nimis redundantes nos et superfluentes iuvenili quadam dicendi
impunitate et licentia reprimeret et quasi extra ripas diffluentes
coerceret.’ The words of Dionysius are ἐπτόηται yap ἅπασα νέου
ψυχὴ περὶ τὸν τῆς ἑρμηνείας wpaicudy (de Comp. Verb. c. 1). R. 4
 κὸ INTRODUCTION. without any external evidence bearing
upon the point. To what century, and to what group of writers on
style, should we have been inclined to assign it? The following table,
which includes the principal writers mentioned earlier in this
introduction, will show the character of the problem, though it may
be very far from suggesting a definite solution of it. The names are
of course arranged, and assigned to centuries, in a rough and
approximate order only. CHRONOLOGICAL TABLE OF GREEK AND
ROMAN EXPONENTS OF STYLE. Empedocles. Corax. Tisias. Gorgias.
Protagoras. 500—400 B.C. Prodicus. Hippias. Theodorus.
Thrasymachus. Antiphon. Lysias. Isocrates. Demosthenes. Plato.
Aristotle. iia aia Theophrastus. Demetrius Phalereus. 300—200 B.C.
[Alexandria.] [Hegesias.] 200—1I00 B.C. [Pergamus.] Hermagoras.
Cornificius. Cicero. Horace. Dionysius of HalicarEOD BiSony dyes
nassus. Caecilius of Calacte. ‘Longinus’ (third century, according to
the traditional Sees tine ene view). Tacitus (Dialogus de Oratoribus).
Quintilian. TOO—200 A.D. Hermogenes. (1) Sources of the Treatise,
and its Prosopographia. Whoever the author may have been, it is
clear that he follows, to a great extent, the teaching of the
Peripatetic school. As will be shown in the course of the Notes,
references are made to Aristotle throughout the treatise. At first
sight, indeed, the De Elocutione might seem to be simply 1 See 88
11, 28, 29, 34, 38, 41, 81, 97, 116, 154, 157, 164, 225, 230, 233,
234.
 DATE AND AUTHORSHIP. 51 a more comprehensive
treatment of the subject of style on the lines laid down in the Third
Book of the Rhetoric. The Peripatetics as a class are mentioned in ὃ
181. Aristotle’s immediate successor Theophrastus is quoted in § 41,
114, Ε΄ 173, τῷ ὍΝ and is probably followed in many other places.
_ The numerous references made to Aristotle in the course of one
brief treatise seem the more noteworthy in contrast with the practice
of other rhetoricians, such as Dionysius of Halicarnassus, who are
inclined to dispute or ignore the authority of the philosophers and
their followers’. It is, accordingly, not surprising that Petrus Victorius
who had studied both the Rhetoric and the De Elocutione so
carefully should have upheld the tradition which ascribes it to
Demetrius Phalereus. This is the view also adopted (probably from
Victorius) by Milton when, towards the end of his 7vactate of
Education, he refers to “a graceful and ornate rhetoric, taught out of
the rule of Plato, Aristotle, Phalereus, Cicero, Hermogenes,
Longinus.’ But though many important details are borrowed from
Aristotle, the scheme of the book as a whole clearly implies the
currency of a doctrine later than his. The treatise opens with an
introductory account of the periodic structure of sentences; but its
real subject is, as already indicated, the four types of style. Now this
classification cannot be due to Aristotle, since in his extant works we
find no more than the germs of such a division of style; and it is
unlikely that Theophrastus recognised four types. Yet the fourfold
division does not appear to have originated with the author of the
De Elocutione (§ 36), though he claims to have treated a neglected
aspect of one of the types (§ 179). It is even stated (§ 36) that
some authorities recognised only two types, the plain and the
elevated. A natural, though not an absolutely necessary, inference
from all this is that the writer lived at a time, considerably later than
that of Aristotle, when the doctrine of the types of style had
undergone many ' D. H. pp. 40, 41.—It will be remembered that the
practical rhetoric of the Isocratic school was revived, at Rome, by
Dionysius, who had for collaborator the Sicilian Caecilius. Though he
more than once acknowledges his own obligations to Theophrastus,
Dionysius rebukes (222. ad Amm. J.) the pretensions of certain
Peripatetics of his day. 4—2
 52 INTRODUCTION. developments and modifications. The
special point in which the De Elocutione differs from all other similar
extant treatises is its recognition of δεινότης as a separate type of
style’. After this brief mention of Aristotle and Theophrastus as
sources from whom parts, and parts only, of the De Elocutione are
drawn, we may proceed to review any further personal names,
occurring in the course of the treatise, which seem to bear on the
question of date and authorship. The most important name from this
point of view is that of Demetrius Phalereus himself, which is actually
found in the treatise. In § 289 we read: “Often in addressing a
despot, or any person otherwise ungovernable, we may be driven to
employ a figure of language if we wish to censure him. Demetrius of
Phalerum dealt in this way with the Macedonian Craterus, who was
seated aloft on a golden couch, wearing a purple mantle, and
receiving the Greek embassies with haughty pride. Making use of a
figure, he said tauntingly: ‘We ourselves once received these men as
ambassadors together with yon Craterus,’” The existence of this
section naturally raised doubts as to the authorship in the minds of
the scholars of the Renaissance ; and the De Flocutione thus passed,
much earlier than the De Sudlimitate, into that position of dispute
and uncertainty which has been the lot of so many Greek rhetorical
treatises. Victorius, however, saw in the section a proof of his own
view with respect to the authorship. It is only natural, he remarks,
that Demetrius Phalereus should desire to keep alive the memory of
a deed which did him so much honour®. Later believers in the
Demetrian authorship have thought it safer to assume, on slender
grounds, that the passage in question is a late addition®. 1 Two
circumstances make it specially difficult to infer date of authorship
from the subject-matter of rhetorical treatises: (1) the dearth of
extant documents in the period between Aristotle and Cicero; (2) the
habit of unacknowledged compilation. 2 Petri Victorii Commentarii in
librum Demetrii Phaleret de Elocutione (Flor., 1594) Pp- 252: ‘*......
qui factum id suum honestum perire noluerit, ideoque monimentis
litterarum prodiderit, quod exemplo multorum facere potuerit,
praesertim cum mirifice conveniat huic loco.” 3H. Liers, De Acetate et
Scriptore libri qui fertur Demetrit Phaleret περὶ ‘Epunvelas, p. 34 
 a i eal τε εν Se PETS ταν τσ ΡΟ ἊΝ DATE AND
AUTHORSHIP. 53 No literary reference throughout the De
LElocutione is so damaging to the traditional view as this. But the
mention of other names, or the manner of their mention, may also
be held to suggest a later time. No inference can perhaps be drawn,
one way or the other, from the nature of the allusions to the orators
Demosthenes and Demades. The supremacy of Demosthenes is, it is
true, not acknowledged quite so explicitly in this as in other writings
of its class; but the possession of a high reputation is implied in the
large number of illustrations drawn from his speeches. Demades_
was an orator of some mark, but the relatively small number of
quotations (§§ 282 ff.) from him shows that he is not considered to
stand on anything like the same level as Demosthenes. A more
definite indication of late authorship may be sought in the
references, (§§ 153, 193, 194) to Menander and Philemon.
Menander and Philemon were contemporaries of Demetrius
Phalereus; but it seems to be the judgment of posterity that is
conveyed in § 193: “This is the reason why, while Philemon is only
read, Menander (whose style is for the most part broken) holds the
boards.” The later standpoint seems also implied in the allusion (§
204) to ἡ νέα κωμῳδία᾽. It is hardly likely, either, that Demetrius
Phalereus — would have spoken collectively of οἱ Περιπατητικοί (§
181) as possessing common characteristics of style, or would have
quoted from Aristotle and Theophrastus as from authorities widely
recognised in the rhetorical schools. The Greek classics seem, in the
De Flocutione, to be designated as οἱ ἀρχαῖοι (§§ 67, 244), as
distinguished from the rhetoricians, styles, and movements of the
author’s own time, which are represented by such expressions as οἱ
viv ῥήτορες (§ 287), ἡ νῦν κατέχουσα δεινότης (§ 245), ds viv
ὀνομάζομεν (§ 237). In connexion with these indications of a later
period may be mentioned a non-literary reference which would seem
to: point to Roman times. The section in question runs as follows:
“In general it may be said that the epiphoneme bears a likeness to
the decorations in wealthy homes,— 1 These and other doubtful
points will be more fully discussed in the Notes.
 54 INTRODUCTION. cornices, triglyphs, and dvoad purples.
Indeed, it is in itself a mark of verbal opulence” (§ 108). If by
πορφύραις πλατείαις in this passage is meant the laticlave of the
Roman senator, then clearly the De Elocutione cannot be from the
hand of Demetrius Phalereus. But unfortunately the expression is not
altogether free from ambiguity. The same uncertainty attends the
reference to the man of Gadara in § 237. If the rhetorician
Theodorus of Gadara is really meant, then we have a reference to
the time not only of Rome but of Augustan Rome?, : The De
Elocutione contains references to many other authors,—poets as well
as prose-writers. But these references yield no definite evidence with
regard to the date of the treatise. There is, however, some reason to
think that Artemon (§ 223) and Archedemus (§ 34) were
comparatively late authors, and their date is accordingly discussed in
the Notes, to which reference may also be made for similar
discussions concerning other writers®. As the references made in
the De Elocutione to previous authors are so numerous, it might
perhaps be thought to be a safe inference that a writer who, like
Dionysius of Halicarnassus, is not mentioned was not known. But
this does not by any means follow, especially if the author of the De
Elocutione was contemporary with, or only slightly later than,
Dionysius. In his rhetorical writings, extensive and miscellaneous as
they are, Dionysius himself only once mentions his contemporary
and fellow-worker Caecilius of Calacte. Nor ought we too readily to
assume that two such authors as Dionysius and the writer of the De
Elocutione would necessarily know of each other’s work. It is
forgotten how small the circulation of books in antiquity may have
been, owing to the expense and labour of reproduction; and how
many, various, and far removed (in time and place) from one
another were the rhetorical schools. For these and other 1 See note
on § 108. 2 See note on ὃ 227. P 1741 has ΓΠαδηρεύς. 3 Sotades (§
189), Dicaearchus (§ 182), Sophron (§ 126), Ctestas (§ 212),
Philistus (§ 198), Clettarchus (§ 304), Praxiphanes (§ 57), and the
painter WVicias (§ 76).
 VRE: eas Re . DATE AND AUTHORSHIP. 55 reasons we shall
look with distrust on that class of argument which would maintain
that the De E/ocutione must of necessity have come later than the
works of Dionysius of Halicarnassus because the latter recognise
only three, the former four types of style. (2) Language of the
Treatise: Vocabulary, Grammar, etc. Leaving the sources and the
personal names of the De Elocutione, we may proceed to investigate
its language, —terminology and vocabulary generally, accidence and
syntax. The very title-word ἑρμηνεία seems itself to imply a
considerably later date than that of Aristotle and Theophrastus, with
both of whom (as it has already been pointed out) the accepted
term for ‘style’ is λέξις, while with Aristotle ἑρμηνεία is a logical or
grammatical rather than a literary term. In the same way, a technical
term so elaborate as ξηροκακοζηλία (§ 239), meaning ‘affectation in
thought and aridity in composition, must surely belong to an
advanced stage in the study of style. The term was, the writer tells
us, in his own day a recent invention, like the simpler compound
κακόζηλος: and certainly no such compound presents itself in
classical times. Another rhetorical term which is specified as recent is
λόγιος, used as equivalent to μεγαλοπρεπής". The phrase ἡ viv
κατέχουσα δεινότης (§ 245) has already [p. 53 supra] been
incidentally mentioned, and attention has been called [p. 52] to the
recognition of δεινότης as a separate type of style. Full details
concerning the rhetorical, grammatical, and metrical terms found in
the De Elocutione are given in the Notes and Glossary ; and as far as
possible, some indication -is added as to the earliest known
occurrence of comparatively late words. Scholars have sometimes
attempted to ground an argument as to date upon the fact that
certain expressions are missing from this rhetorical terminology, the
chief of which perhaps is τρόπος in the sense of ‘trope. They have
urged that, inasmuch as Cicero (Srut. xvii. 6) employs the term and
as it probably was in use considerably before his time, the De
Hilocutione must have been written at a com1 § 38 ἄρξομαι δ᾽ ἀπὸ
τοῦ μεγαλοπρεποῦς, ὅνπερ viv λόγιον ὀνομάζουσιν.
 56 INTRODUCTION. paratively early date. But apart from
the possibility that the word is employed in this sense in § 120, no
trustworthy argument can be founded on omissions of this kind. It is
unsafe to infer ignorance from silence. On the other hand, the late
words or forms occurring in the De Elocutione are very numerous.
The following belong to the post-classical age, none of them being
found (in extant documents) earlier than Alexandrian, and some not
earlier than Graeco-Roman times :— ἀνθυπαλλαγή (ὃ 60)
ἀνθυπαλλάσσειν (§ 59) ἀνυπόκριτος (ὃ 194) ἁπλοῖκός (δ 244)
ἀποτομία (§ 292) ἀποφθεγματικός (ὃ 9). ἀρκτικός (§ 56) ἀσημείωτος
(ὃ 202) ἀστεῖσμός (δὲ 128, 130) ἀσφαλίζεσθαι (δὲ 85, 193) αὐλητρία
(§ 240) γνωμολογικός (8 9) διαμόρφωσις (§ 195) διασπασμὸός (ὃ
68) διήγημα (δὲ 8, 137, etc.) δυσήκοος (ὃ 48) δυσκατόρθωτος (ὃ
127) δύσρητος (§ 302) δύσφθογγος (8 246) δυσφωνία (δ 48, 105)
δύσφωνος (δ 69, 70, 105) ἐμφατικός (δ 51) ἐναφανίζειν (§ 39)
ἐξαιρέτως (ὃ 125) ἐξαπλοῦν (ὃ 254) εὐήκοος (δὲ 48, 258, 301)
θαυμασμός (§ 291) κακοφωνία (§§ 219, 255) καταληκτικός (§§ 38,
39) κατασμικρύνειν (δὲ 44, 123) κατερᾶν (ὃ 302) κινδυνώδης (δ 80,
85, 127) KUKNOELONS (§ 1} λεκανίς (§ 302) λιθοβολεῖν (§ 115)
μεταμορφοῦν (ὃ 189) μονοσύλλαβος (ὃ 7) ὁλοκληρία (δ 3)
ὀνειδιστικῶς (ὃ 280) παραπληρωματικός (§ 55) προκαταρκτικός (δὰ
38, 39) ῥυθμοειδής (§ 221) σμικρύνειν (§ 236) σπειρᾶν (ὃ 8)
συγκάλυμμα (§ 100) συγκαταλήγειν (δ 2) συμπεραιοῦν (δ 2)
συναλοιφή (ὃ 70) συνάφεια (δὲ 63, 182) τουτέστιν Or τοῦτ᾽ ἔστι (ὃ
271, 294, 301) ὑποδάκνειν (§ 260) ὑποκατασκευάζειν (δ 224)
φιλοφρόνησις (δδ 231, 232) Similarly the treatise contains a number
of words found
 DATE AND AUTHORSHIP. 57 in classical times but here
used in a post-classical sense,— in a meaning not found before the
Graeco-Roman or at all events the Alexandrian age :— ἀπαγγελία (§
114) ἠχώδης (δὰ 42, 68) αὐτόθεν (§ 122) λογικός (88 1, 42, 117)
βάσανος (ὃ 201) λοιπόν (ὃ 240) διαπαίζειν (§ 147) παρέλκειν (§ 58)
δοκιμάζειν (§ 200) περιαγωγή (S§ 19, 45, etc.) ἐκτίθεσθαι (δὲ 35,
200) πρόσωπον (δ 130, 134, etc.) ἐπιφέρειν (S§ 34, 51, etc.)
σημειώδης (ὃ 208) ἑρμηνεύειν (βᾷ 46, 120,121) ὑὑπερπίέπτειν (8
42) On the other hand, a good many words or forms occur which
are specially Attic :— ἄγροικος (δὰ 167, 217) κωμῳδεῖν (ὃ 150)
ἀτεχνῶς (§ I, 5, etc.) κωμῳδοποιός (ὃ 126) ἀστεἴΐζεσθαι (δ 149)
ναυτιᾶν (δ 15) αὐτοσχεδιάζειν (§ 224) σμικρός (§ 237)
ἑτερόφθαλμος (ὃ 293) τερθρεία (§ 27) κινδυνεύειν (§ 40) ψίαθος (§
302) κομψρεία (ὃ 36) These Attic forms are of course consistent with
either classical or post-classical date,—with either Attic or Atticist
authorship. But the latter alternative is decisively recommended by
the simultaneous occurrence of so many words and forms which are
admittedly post-classical. The Atticism is but the veneer. It is worth
notice that a considerable number of words or forms occurring in the
De Elocutione are ἅπαξ εἰρημένα. The following list is, probably,
fairly complete :— ἀδολεσχότερος (ὃ 212) μετροειδής (88 181, 182)
ἀρχαιοειδής (ὃ 245) ξηροκακοζηλία (ὃ 239) ἀτακτοτέρως (ὃ 53)
παράξυσμα (§ 55) δυνάστις (§ 292) περισσοτεχνία (ὃ 247)
δύσφθογγος (§ 246) πολυηχία (§ 73) ἐπιπληθύεσθαι (δ 156)
προαναβοᾶν (ὃ 15) εὐκαταστρόφως (§ 10) πρόσφυμα (ὃ 55)
μετασυντιθέναι (§ 11, 59, etc.) συνειρμός (ὃ 180)
 58 INTRODUCTION. Most of these words are probably late.
But the very existence of words found only in the De Elocutione
suggests caution in the use of the linguistic criterion.. We are bound
constantly to bear in mind the fact that we have but the scanty
remains of a vast literature. The extent to which the treatise, as it
has come down to us, uses both older and later forms of the
language is seen in its employment, at one and the same time, of oo
and rr. In close conjunction we find ἀνθυπαλλάσσοντα and
διαταττομένῳ (ὃ 59), ἐφυλάττετο and συμπλήσσειν (δ 68). The
Ionic form oo was used by the older Attic writers such as Thucydides
; rr prevails in Attic inscriptions, as also in Xenophon, the Attic
orators, Plato, Aristotle; oo is favoured by the κοινή, tr by the
Atticists. If we are to accept the best manuscript testimony, the
author of the De Elocutione used both forms’. The point is a small
one in itself, but it illustrates forcibly the mixed character of the
language of the De Elocutione. We pass next to the grammar of the
treatise. Here the chief point for remark is that the dual is repeatedly
found, e.g. ὥσπερ ἀνθέστατον καὶ ἀντίκεισθον ἐναντιωτάτω § 36, ἐκ
δυοῖν χαρακτήροιν τούτοιν ὃ 235, μετὰ δυοῖν τούτοιν § 287. The
first of these examples is the most striking, because it was in its
verbal forms, and in the nominative and accusative cases of its
nominal forms, that the dual began its decline. It would be hard to
match this emphatic collocation of dual forms in any Greek author
from the time of Aristotle to that of the Atticists%» The dual
number, it is well known, had practically disappeared from Greek
literature when it was revived by the Atticists, who were however
unable to secure for it more than a brief existence. The neglect of
the dual, shown in Biblical Greek and in later Greek generally, is
shared by Modern Greek. | Traces of the κοινή, on the other hand,
are found in the 1 In the same way both σμικρός and μικρός are
found in P 1741,—sometimes side by side, as in 8122. So with
γίγνεσθαι and γίνεσθαι. Seealso m. ty. p. 179. 2 Cp. H. Schmidt De
Dual Graecorum et Emoriente et Reviviscente (Breslauer
Philologische Abhandlungen vi. 4).
 ταῖν ΡΤ τ παρεὸν DATE AND AUTHORSHI?. 59 use of Ionic
forms, such as the genitive νηός (δ 78); of adverbs formed from
participles, e.g. λανθανόντως (ὃ 181) and λεληθότως (ὃ 297); and of
such verbs as κρεμνᾶν (§ 216) and χωνεύειν (ὃ 281). In regard to
syntax the most noticeable feature of the treatise is, perhaps, the
frequent use of the optative mood (which, like the dual, was affected
by the Atticists), and the somewhat capricious insertion or omission
of ἄν in connexion with it. Other points indicative of, or consistent
with, a late date are: prepositions used in a strained sense (e.g. διά
almost Ξε ἐκ, ὃ 12); rare verbal constructions (e.g. ξἕηλοτυπεῖν c.
dat. § 292); interchange of pronouns (e.g. ὅδε with οὗτος, τοσόσδε
with τοσοῦτος, § 59, 189); use of ἤπερ after comparatives (e.g. §
12); inversions of the natural order of words (eg. ἐπὶ τῶν Ilepody
τῆς ἀπληστίας, ὃ 126). Points of this kind will be discussed more fully
in the Notes and Glossary. A general review of the internal evidence
—subject-matter and language alike—would seem to suggest that
the De Elocutione, in the form in which we have it, belongs not to
the age of Demetrius Phalereus, but either to the first century B.C.
or to the first century A.D." The rhetorical standpoint appears to be
that of the Graeco-Roman period earlier than Hermogenes and
(possibly) later than Dionysius. The language, likewise, is post-
classical*. Marked by all the comprehensiveness of the κοινή, which
drew freely from so many sources, it also exhibits the learned
archaism of the Atticists, but not of the stricter Atticists (including
Hermogenes) of the second century A.D.—Such being the internal
evidence as to the date of composition, we have now to ask what is
the external evidence as to the name and identity of the author. 1 It
is necessary always to insert the limitation, ‘in the form in which we
have it.’ If we are at liberty to assume interpolations and accretions,
an earlier date may be postulated. Thus the Rhetorica ad
Alexandrum is commonly regarded as the work of Anaximenes,
though it contains such forms or phrases as εἵνεκα,
καθυποπτευθέντων, παλιλλογία, προγυμνάσματα, μήτε (for οὔτε),
δράματα (for πράγματα), εἰδήσομεν, ἀναλογητέον, τὴν προτροπὴν
πέρατι ὁρίσαι, οἷον ὁδὸς τών θυρῶν καὶ ὁδὸς ἣν βαδίζουσιν, εἰ μὲν
τὰ πράγματα πιστὰ ἢ (Cope’s 7»ηἐγοαϊμείίογε to Aristotle's Rhetoric
ΡΡ- 409—412, 438, 464). * Not simply paulo-post-classical, as that
of Demetrius Phalereus, described on pp- 17, 18 supra.
 60 INTRODUCTION. II. EXTERNAL EVIDENCE.—
CONCLUSION. (1) Allusions to the ‘‘De Elocutione”’ in other writings.
The supposed allusions to the De Flocutione in other writings are
doubtful if early, and late if well-authenticated. The earliest writer
thought to refer to the work is Philodemus, who, in his Rhetoric iv.
16, says πονηρὸν yap εἰς ὑπόκρισιν ai μακραὶ περίοδοι, καθάπερ Kal
παρὰ Δημητρίῳ κεῖται περὶ τῶν ᾿Ισοκράτους. It has been sug- -
gested that Philodemus here has in mind the De Elocutione § 303
καὶ ai περίοδοι δὲ ai συνεχεῖς καὶ μακραὶ καὶ ἀποπνίγουσαι τοὺς
λέγοντας οὐ μόνον κατακορὲς ἀλλὰ καὶ ἀτερπές. But it is improbable
that the periods of Isocrates are specially meant in this passage, and
consequently the supposed reference is doubtful. Further, it is to be
noticed that Philodemus speaks vaguely of ‘Demetrius’ without any
addition; and 80 may, or may not, have Demetrius Phalereus in
mind. It may be added that Cicero, who was contemporary with
Philodemus, often refers to Demetrius Phalereus but betrays no
knowledge of the De Elocutione. Nor does Diogenes Laertius (150
A.D.) make any mention of the De Elocutione in the long list he gives
of the works of Demetrius Phalereus. On the other hand, Ammonius
(500 A.D.), the son of Hermeias, in his commentary on the
Aristotelian περὶ ‘Epynvetas, appears to mention the De Elocutione
and to ascribe it to ‘ Demetrius’ (without addition): od yap δὴ Kat
αὐτὸς (ὁ ᾿Αριστοτέλης) καθάπερ Δημήτριος τὸ περὶ λογογραφικῆς
ἰδέας βιβλίον συγγράψας, καὶ οὗτος αὐτὸ ἐπιγράψας περὶ “Ἑρμηνείας
ἀξιοῖ καλεῖν ἑρμηνείαν τὴν λογογραφικὴν ἰδέαν (‘prose style’), ὡς δὴ
περὶ ταύτης ἐν τῷ προκειμένῳ βιβλίῳ διαλεξόμενος....... διὰ τοῦτο
ἐπέγραψε τὸ βιβλίον περὶ “Epunveias, ὡς οὐδὲν διαφέρον ἢ οὕτως
ἐπιγράφειν ἢ περὶ τοῦ ἀποφαντικοῦ λόγου. The remaining testimony
of the same kind is of still later date. Theophylact (eleventh
century), archbishop of Bul1 Berlin Aristotle iv. 96 b, 97a.
 a ψυχανιοοςοι δε ππχ DATE AND AUTHORSHIP. 61 garia,
has ὁ δὲ Φαληρεὺς καὶ περὶ ἑρμηνείας λόγου συνταγμάτιον
σπουδαῖον ἐξήνεγκεν (Epist. ad Rom. Theoph., viii. 981); and a
scholiast on Tzetzes (who himself belongs to the twelfth century)
has ὁ Φαληρεὺς δὲ χάριν ὀνομάζει TO ἀστεῖον (Cramer, Anecdota
Graeca iii. 384). The scholiasts on Hermogenes often (e.g. Gregor.
Cor. vii. 1215 W., Anon. vii. 846, viii. 623, Max. Plan. v. 435) refer to
the De Elocutione, but without implying anything as to the author’s
name or date, except that he belonged to οἱ ἀρχαῖοι or of παλαιοί.
This designation, however, would not, with Byzantine scholiasts,
necessarily imply the classical period, since late writers like Apsines
and Hermogenes himself are so designated. And the scholiasts on
Hermogenes belong, almost without exception, to Byzantine times,
the best-known of them (Gregorius, the Metropolitan of Corinth)
being not earlier than the twelfth century. A passage from a writer of
earlier date deserves separate mention. In his prolegomena to
Hermogenes’ De Jdeis, Syrianus (fourth century) has the following
remarks: εἰ δὲ καὶ διενοήθησάν tives ἐπιγράψαι τοὺς χαρακτῆρας Kal
τὸ ποσὸν αὐτῶν συστῆσαι, τηνάλλως ἐποίησαν ὡς εἷς ἐστιν ὁ
Διονύσιος " οὗτος γὰρ τρεῖς εἶναι χαρακτῆράς φησι, τὸν ἰσχνόν, τὸν
μέσον, τὸν adpov: ὁ δὲ Ἵππαρχος προστίθησι τόν τε γραφικὸν καὶ
τὸν ἀνθηρόν" ὁ δὲ Δημήτριος ἐκβάλλει τὸν γραφικὸν τοῖς τετράσιν
ἀρεσκόμενος (Walz Rhet. Gr. vii. 93). It seems possible,
notwithstanding discrepancies of terminology, that Dionysius of
Halicarnassus and the author of the De Elocutione are here meant;
and if so, a further natural inference is that the latter was regarded
as considerably later in date than the former, and that between them
had come a certain Hipparchus, who had played.a part of his own in
the development of the Greek doctrine of prose style. (2) Manuscript
Title. There still remains the evidence of P 1741,—evidence which is
as old, and may be much older, than some of the testimony just
mentioned. At the beginning of the treatise this manuscript gives
Δημητρίου Φαληρέως περὶ ἑρμηνείας & ἐστι περὶ φράσεως : at the
end, simply Δημητρίου περὶ ἑρμηνείας.
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