This book has been written to provide readers with a balanced discussion of different theories of financial accounting. Various theories for and against regulation of financial accounting are critically discussed and various theoretical perspectives, including those provided by Positive Accounting Theory, Political Economy Theory, Stakeholder Theory, Institutional Theory and Legitimacy Theory, are introduced to explain different types of voluntary reporting decisions. The book also describes and evaluates the development of various normative theories of accounting, including various approaches developed to account for changing prices, different normative perspectives about the accountability of business entities, as well as various conceptual framework projects. It also emphasises the role of a number of factors in explaining both international differences in accounting and recent efforts towards the globalisation of international financial reporting standards.

Apart from providing explanations for why or how organisations should disclose particular items of financial information, the book investigates research that explores how or whether people at an aggregate and individual level demand or react to particular disclosures. Reflecting the growing relevance of social and environmental reporting issues to students, government, industry and the accounting profession, social and environmental reporting issues are discussed in depth. The book also provides an insight into the role of financial accounting from the perspective of a group of researchers who are often described as working from a ‘critical’ perspective.

Divided into twelve chapters sequenced in a logical order, this book provides the basis for subjects or units that investigate financial accounting theory. Alternatively, the book can be used as a key text for more general courses that include coverage of aspects of financial accounting theory. The entire book could realistically be used in the average eleven- to thirteen-week university term, with chapters being studied in the sequence in which they are presented. Because it presents a balanced perspective on alternative and sometimes conflicting theories of financial accounting, it also provides a sound basis for readers contemplating further research in different areas of financial accounting.

In writing this book, a style has been adopted that enables students at both the undergraduate and the postgraduate level to gain a sound understanding of financial accounting theory. As each chapter incorporates research from around the world, the book is of relevance to financial accounting theory students internationally. To assist in the learning process, each chapter provides learning objectives, chapter summaries and end-of-chapter discussion questions.

Throughout the book readers are encouraged to critically evaluate and challenge the various views presented. To give the different perspectives a ‘real world’ feel, many chapters use recent articles from newspapers, directly related to the issues under consideration.

In the nine years since the first edition of this book was published, it has proved very popular with students and lecturers in Australia and internationally. This new edition retains and builds on the features of the first and second editions that students and lecturers found so appealing and distinctive, such as the use of straightforward explanations, the assessable nature of the language, frequent practical examples, and illustrations using newspaper articles. I have taken the opportunity of updating the text to reflect the sometimes significant developments in accounting theory over the past nine years.

I hope readers continue to find this book interesting, informative and enjoyable to read and I welcome constructive feedback.

Craig Deegan
RMIT University