This is the sixth edition of a book that was originally published in 1995. Since the first edition of this book was written we have seen many changes made in relation to the practice of financial reporting. As we would know, from 2005 Australia adopted the accounting standards and conceptual framework issued by the International Accounting Standards Board (IASB). The adoption of International Financial Reporting Standards (IFRSs) created great changes in how we undertook financial accounting within Australia. However, even more changes have followed. As the book explains, unlike many other countries, the United States elected not to adopt IFRS, but instead, retained its own domestically developed accounting standards. These accounting standards are developed by the US Financial Accounting Standards Board (FASB).

Because there is still a maintained view held by organisations such as the IASB and FASB that it is preferable to have one uniform set of accounting standards for world-wide use the IASB and FASB have committed to a ‘convergence project’ in which joint work is being undertaken to reduce major differences between the accounting standards being issued by both of these standard-setting bodies. The ultimate aim is that the US will ultimately adopt IFRS once significant differences between the two sets of standards have been reduced to acceptable levels. However, the timing of the US adopting IFRS is far from certain.

Because of factors such as the convergence project there continues to be many changes made to existing accounting standards issued by the IASB as well as many new accounting standards being released by the IASB. Major changes are expected to continue for a number of years. Those changes that have been made as at the time of writing this book have been incorporated within the respective chapters of this text. Some of the major changes we cover relate to such areas as financial instruments, financial statement presentation (for example, we will look at the new requirements pertaining to statements of financial position, statements of comprehensive income and statements of changes in equity), and consolidation accounting (in which, for example, there have been fundamental changes in how we account for the non-controlling interests).

Further, the IASB and the FASB are also developing a revised conceptual framework of reporting that will also generate significant changes to the current IASB Framework for the Preparation and Presentation of Financial Statements (IASB Framework). This text describes the nature of some of these changes and the potential impact it will have on general purpose financial reporting.

Each chapter of this sixth edition contains learning objectives, chapter summaries, and a comprehensive end-of-chapter exercise. A glossary of key terms is provided towards the back of the book. The book provides material that will enable the reader to gain a thorough grasp of the contents and of the practical application of the majority of financial accounting requirements currently in place in Australia. In the discussion of these requirements, numerous worked examples, with detailed solutions, are provided throughout the text.

As well as addressing how to apply the various accounting requirements, this text also encourages readers to critically evaluate the various rules and guidelines. The aim is to develop accountants who are not only able to apply particular accounting requirements, but who will also be able to contribute to the ongoing improvement of accounting requirements. The view taken is that it is not only important for students to understand the rules of financial accounting, but also to understand the limitations inherent in many of the existing accounting requirements. For this reason, reference is made to various research studies that consider the merit, implications, and costs and benefits of the various accounting requirements. Also, various newspaper articles discussing different aspects of the accounting requirements are reproduced for consideration and discussion. The permission of copyright holders to reproduce this material is gratefully acknowledged.

Social-responsibility reporting continues to be an important area of accounting, and one that is rapidly developing. Its importance was further highlighted as a result of the February 2007 report of Intergovernmental Panel on Climate Change (entitled Working Group I Fourth Assessment Report), as well as the Garnaut Report that was issued in Australia in 2008. These reports emphasised the link between corporate activities and climate change and the need for rapid improvements in corporate environmental performance and related accountability. While this book predominantly considers financial accounting and reporting, Chapter 37 focuses on social-responsibility reporting and provides the most up-to-date and comprehensive material available on this important topic.

Writing a text like this is an extremely time-consuming exercise and it has been very gratifying that the effort involved has been rewarded by so many institutions across Australia (and also some outside Australia) electing to prescribe previous editions of this book as part of their accounting programs. Given the success of all previous editions, every effort has been made to ensure that this sixth edition is equally valuable to students and teachers, and that it has been substantially and thoroughly revised.