Table of Contents

Preface
1. AN INTRODUCTION TO ACCOUNTING THEORY
Accounting Theory and Policy Making
The Role of Measurement in Accounting
Plan of This Book
Appendix 1-A: Valuation Systems
2. ACCOUNTING THEORY AND ACCOUNTING RESEARCH
Accounting Research and Scientific Method
Is Accounting an Art or a Science?
Directions in Accounting Research
A Scientific Revolution in Accounting?
3. DEVELOPMENT OF THE INSTITUTIONAL STRUCTURE OF FINANCIAL ACCOUNTING
Accounting in the United States Prior to 1939
Formative Years, 1930-1946
Postwar Period, 1946-1959
Modern Period, 1959 to the Present
4. THE ECONOMICS OF FINANCIAL REPORTING REGULATION
The Case for Unregulated Markets for Accounting Information
Regulated Markets
Imperfections of Accounting Regulation
The Regulatory Process
Economic Consequences of Accounting Policy
5. POSTULATES, PRINCIPLES, AND CONCEPTS
Postulates and Principles
Basic Concepts Underlying Historical Costing
Equity Theories
Appendix 5-A: The Basic Postulates of Accounting
Appendix 5-B: A Tentative Set of Broad Accounting Principles for Enterprises
6. THE SEARCH FOR OBJECTIVES
ASOBAT
APB Statement 4
The Trueblood Committee Report
SATTA
User Objectives and User Diversity
7. THE FASB’S CONCEPTUAL FRAMEWORK
The FASB Conceptual Framework
The Conceptual Framework as a Codificational Document
Empirical Research on the Conceptual Framework
Assessing the Conceptual Framework
8. USEFULNESS OF ACCOUNTING INFORMATION TO INVESTORS AND CREDITORS
Earnings, Dividends and Stock Prices
Residual Income Models
Background on Risk and Return
Introduction to Capital Markets Research in Accounting
The Value of Accounting Information: Evidence From Return Data
The Value of Accounting Information: Evidence From Direct Valuation
Accounting Data and Creditors
Importance of Earnings Forecasting
Empirical Research and Standard Setting
9. UNIFORMITY AND DISCLOSURE: SOME POLICY-MAKING DIRECTIONS
What Underlies the Choice Among Accounting Methods?
Uniformity
The Usefulness of Accounting Allocations
Disclosure
10. INTERNATIONAL ACCOUNTING
National Accounting Differences
International Harmonization of Accounting Standards
11. THE BALANCE SHEET
The Relationship Between the Balance Sheet and the Income Statement
Assets
Liabilities
Owners’ Equity
Financial Instruments
Classification in the Balance Sheet
Appendix 11-A: A Simple Example of a Weather Derivative
12. THE INCOME STATEMENT
Income Definitions
Revenues and Gains
Expenses and Losses
Future Events and Accounting Recognition
Current Operating Versus All-Inclusive Income
Nonoperating Sections
Earnings per Share
Special Subjects Concerning Income Measurement
Earnings Management
Income Statement Developments
13. STATEMENT OF CASH FLOWS
The Statement of Changes in Financial Position
The Motivation for a Cash Flow Statement
Requirements of the Cash Flow Statement
Classification Problems of SFAS No. 95
Analytical Usefulness of the Cash Flow Statement
Cash and Funds Flow Research
Improving the SCF
14. ACCOUNTING FOR CHANGING PRICES AND INFLATION
Institutional Aspects of Inflation Accounting Prior to SFAS No. 33
An Overview of Inflation Accounting
Provisions of SFAS No. 33 and Rejection in SFAS Nos. 82 and 89
SFAS No. 157
15. INCOME TAXES AND FINANCIAL ACCOUNTING
Income Tax Allocation
The Asset-Liability Orientation of SFAS No. 109
Empirical Research on Income Tax Allocation
International Accounting Standards
16. PENSIONS AND OTHER POSTRETIREMENT BENEFITS
Overview of Pension Plans
Development of Pension Accounting Standards
Postretirement Benefits Other Than Pensions
International Accounting Standards
Appendix 16-A: Illustration of Pension Expense Determination and Actuarial Funding Methods
17. LEASES
The Lease Contract
The Evaluation of Lease Accounting Standards
Lease Accounting Under the IASB
18. INTERCORPORATE EQUITY INVESTMENTS
Relevant Circumstances
Consolidation
The Equity Method
The Fair Value Method
Defining the Reporting Entity
Translation of Foreign Operations
Appendix 18-A: Special Purpose Entities, Variable Interest Entities and the Downfall of Enron

About the Author

Harry I. Wolk (1930-2009) held a BS in economics from the Wharton School of the University of Pennsylvania and MBA and PhD degrees from Michigan State University. He was the author or co-author of approximately 25 journal articles, including publications in the Accounting Review, Journal of Accounting Research, Accounting Horizons, and the International Journal of Accounting. He was the lead author of seven editions of Accounting Theory: Conceptual Issues in a Political and Economic Environment. He previously taught at the University of Wisconsin–Milwaukee and was the Aliber Distinguished Professor of Accounting at Drake University, where he taught for 32 years. He also visited Creighton University, where he was John P. Begley Professor of Accounting. He was a member of the American Accounting Association and Financial Executives International, where he served as president of the Iowa Chapter. Outside of accounting, his interests were in following national and world affairs closely, listening to classical music, and following the fortunes of the Boston Red Sox, Boston Celtics, and the New England Patriots.

James L. Dodd, Professor Emeritus of Accounting at Drake University, holds a BS in accounting from California State University–Fresno, an MBA from the University of South Alabama, and a PhD from the University of Georgia, with a major in accounting and a minor in information systems. Before entering academe, Dr. Dodd worked for 15 years in the shipbuilding, aircraft-engine, and diesel-engine filtration industries. His assignments at Litton, Teledyne, and Cummins included experience in industrial engineering, capital budgeting, profit planning, product pricing, cost accounting, long-range systems planning, and accounting controllerships at plant and corporate levels. He is a Fulbright Scholar alumnus, participating in academic exchanges with Norway (1999–2000) and Iceland (2007). His teaching and research include areas in accounting theory, fraud examination, and international accounting. On a personal level, he enjoys working with his hands, listening to bluegrass music, watching SEC sports, and volunteering as an AARP-IRS tax aide. He is a Southerner, born in Birmingham, Alabama, married to his college sweetheart for 48+ years; he has one daughter and two grandchildren.

John J. Rozycki, Associate Professor of Finance at Drake University, holds a BS in biology from King’s College, an MBA from the University of Scranton, and a PhD from Penn State University, with a major in finance. Before pursuing his doctoral education, Dr. Rozycki worked in the health care planning and telecommunications industries. He teaches corporate finance and equity valuation. His professional interests are in equity and business valuation, corporate capital allocation decisions, financial planning, financing decisions, and financial statement analysis. He is a member of the CFA Institute, the CFA Society of Iowa, the Financial Management Association, and the Midwest Finance Association. He is a CFA charterholder. He was born in Wilkes-Barre, Pennsylvania, and is married with two sons. He is active in his church and enjoys the outdoors.