Preface vii
About the authors ix
How to use this book x
Acknowledgements xii
CHAPTER 1 Contemporary issues in accounting 1
Accounting theory 5
Why theory is needed 6
Types of theories 8
Evaluating and testing theories 11
Understanding the role of research 12
Research areas in accounting 14
Overview of chapters in this text 15
Summary 19
Review questions 20
Additional readings 20
End notes 21
CHAPTER 2 The Conceptual Framework for Financial Reporting 23
The role of a conceptual framework 25
History and evolution of the Conceptual Framework 27
The structure and components of the Conceptual Framework 28
Purpose, objective and underlying assumption of the Conceptual Framework 31
Qualitative characteristics of useful financial information 35
The elements of fi nancial statements 38
The benefits of a conceptual framework 41
Problems with and criticisms of the Conceptual Framework 44
Summary 48
Review questions 49
Application questions 50
Additional readings and websites 58
End notes 59
CHAPTER 3 Standard setting 61
Institutional framework 63
Accounting standards 65
Rules-based versus principles-based standards 66
Theories of regulation 69
Theory and accounting regulation research 74
The political nature of setting accounting standards 74
Harmonisation 78
Summary 80
Review questions 81
Application questions 82
Additional readings 85
End notes 86
CHAPTER 4 Measurement 89
Measurement in accounting 91
Measurement approaches and the accounting standards 93
Measurement and the quality of accounting information 104
Fair value 109
Stakeholders and the political nature of accounting measurement 111
Why measurement is a controversial accounting issue 116
Current measurement challenges 117
Summary 122
Review questions 123
Application questions 124
Additional readings 129
End notes 129
CHAPTER 5 Theories in accounting 131
What value does theory offer? 133
Types of theories 134
Positive accounting theory 134
Institutional theory 141
Legitimacy theory 142
Stakeholder theory 145
Contingency theory 147
Using theories to understand accounting decisions 147
Summary 150
Review questions 152
Application questions 153
Additional readings 155
End notes 155
CHAPTER 6 Products of the nancial reporting process 159
Identifi cation of the reporting entity 161
When information is reported 162
Manipulation of reported earnings 163
Exclusion of activities from the fi nancial reporting process 166
Voluntary disclosures 168
Why entities voluntarily disclose 174
Summary 177
Review questions 178
Application questions 179
Additional readings 182
End notes 183
CHAPTER 7 Corporate governance 185
The interest in corporate governance 187
What is corporate governance? 188
The need for corporate governance systems 189
Corporate governance guidelines and practices 191
Approaches to corporate governance 196
Developments and issues in corporate governance 198
Role of accounting and fi nancial reporting in corporate governance 202
The role of ethics 206
International perspectives and developments 209
Summary 211
Review questions 212
Application questions 213
Additional readings 219
End notes 220
CHAPTER 8 Capital market research and accounting 223
Capital market research and accounting 225
Research methods: event studies and value relevance 229
What the information perspective studies tell us 229
Do auditors or intermediaries add value to accounting information? 232
Value relevance 233
What value relevance studies tell us 235
The effi ciency of capital markets 237
Behavioural finance 239
Summary 244
Review questions 245
Application questions 246
Additional readings 251
End notes 251
CHAPTER 9 Earnings management 255
The importance of earnings 257
What is earnings management? 257
Methods of earnings management 258
Why do entities manage earnings? 261
Consequences of earnings management 266
Corporate governance and earnings management 266
Summary 268
Review questions 270
Application questions 270
Additional readings 272
End notes 272
CHAPTER 10 Fair value accounting 275
The role of fair value in accounting 277
The traditional defi nition 278
AASB 13/IFRS 13 Fair Value Measurement 279
Fair values are specifi c, what factors should be considered? 284
Fair value techniques 289
Disclosures 296
Specific issues 303
Summary 305
Review questions 306
Application questions 307
Additional readings 310
End notes 311
CHAPTER 11 Sustainability and environmental accounting 313
What is sustainability? 315
Sustainability reporting 317
Guidelines for sustainability reporting 320
Stakeholder infl uences 325
Environmental management systems 328
Climate change and accounting 329
Summary 333
Review questions 334
Application questions 335
Additional readings 337
End notes 338
CHAPTER 12 International accounting 341
Defi nition of international accounting 343
Diversity of international accounting practice 344
Environmental infl uences on accounting 344
International adoption of IFRSs 348
FASB and IASB convergence 354
Multinational organisations 355
Summary 357
Review questions 358
Application questions 358
Additional readings 360
End notes 361
CHAPTER 13 Corporate failure 363
What is corporate failure? 365
Causes of corporate failure 366
Costs of failure 367
Predicting corporate failure 367
Indicators of corporate failure 368
Corporate governance issues 369
Regulation and political responses to corporate failure 370
The anatomy of a corporate failure 371
A case study: the global fi nancial crisis 373
Summary 376
Review questions 378
Application questions 379
Additional rea dings 380
End notes 381
CHAPTER 14 Special reporting issues 383
Background 385
What expenditures should be capitalised? 386
Do intangibles pass the defi nition and recognition tests? 388
Implications of non-recognition of intangibles 392
Do heritage assets pass the defi nition and recognition tests? 394
Implications of recognition of heritage assets 399
Summary 401
Review questions 403
Application questions 403
Additional readings 409
End notes 409
List of key terms 412
Index 418
