Contemporary Issues In Accounting Essay Questions

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Preface vii

About the authors ix

How to use this book x

Acknowledgements xii

CHAPTER 1Contemporary 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 2The Conceptual Framework for FinancialReporting 23

The role of a conceptual framework 25

History and evolution of the Conceptual Framework 27

The structure and components of the ConceptualFramework 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 ConceptualFramework 44

Summary 48

Review questions 49

Application questions 50

Additional readings and websites 58

End notes 59

CHAPTER 3Standard 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 4Measurement 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 5Theories 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 6Products 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 7Corporate 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 8Capital 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 9Earnings 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 10Fair 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 11Sustainability and environmentalaccounting 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 12International 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 13Corporate 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 14Special 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

  • Chapter 2 outlines the recent reforms addressed in the Conceptual Framework for financial reporting
  • Chapter 5 summarises accounting theories and the valuable role they play in decision making and determining the appropriate accounting policy
  • Chapter 10 Fair value accounting discusses AASB13 which is a new accounting standard on the controversial issue of accounting for assets and liabilities at fair value
  • Chapter 11 Environmental accounting and sustainability provides an overview to the developments associated with sustainability and accounting for sustainable business practices
  • Chapter activities are codified to the Threshold Learning Outcomes for accounting: Judgement, Application Skills, Knowledge, Communication & teamwork and Self-Management
  • ‘Contemporary issue' vignettes present a range of real accounting and corporate experiences that encourage discussion and analysis
  • Mind Maps open each chapter and provide a schematic summary of the key conceptual interrelationships associated with the chapter topic
  • Professional Application Questions reflect Australian and international accounting and financial


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