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Accounting Theory

Accounting Theory
Conceptual Issues in a Political and Economic Environment

Ninth Edition

July 2016 | 672 pages | SAGE Publications, Inc

This updated Ninth Edition of Accounting Theory: Conceptual Issues in a Political and Economic Environment continues to be one of the most relevant and comprehensive texts on accounting theory. Authors Harry I. Wolk, James L. Dodd, John J. Rozycki provide a critical overview of accounting as a whole as well as touch on the financial issues in economic and political contexts, providing readers with an understanding of how current United States accounting standards were derived and where we might be headed in the future. Readers will find learning tools such as questions, cases, problems and writing assignments to solidify their understanding of accounting theory and gain new insights into this evolving field.

Chapter 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

Chapter 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?

Chapter 3: Development of the Institutional Structure of Financial Accounting
Accounting in the United States Prior to 1930

Formative Years, 1930-1946

Postwar Period, 1946-1959

Modern Period, 1959 to the Present

Chapter 4: The Economics of Financial Reporting Regulation
The Case for Unregulated Markets for Accounting Information

The Case for Regulated Markets for Accounting Information

Imperfections of Accounting Regulation

The Regulatory Process

Economic Consequences of Accounting Policy

Chapter 5: Postulates, Principles, and Concepts
Postulates and Principles

Basic Concepts Underlying Historical Costing

Equity Theories

Appendix 5-A: The Basic Postulates of Accounting (ARS 1)

Appendix 5-B: A Tentative Set of Broad Accounting Principles for Business Enterprises (ARS 3)

Chapter 6: The Search for Objectives

APB Statement 4

The Trueblood Committee Report


User Objectives and User Diversity

Chapter 7: The FASB’s Conceptual Framework
The FASB’s Conceptual Framework

The Conceptual Framework as a Codificational Document

Empirical Research on the Conceptual Framework

Assessing the Conceptual Framework

Chapter 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

Chapter 9: Uniformity and Disclosure: Some Policy-Making Directions
What Underlies the Choice Among Accounting Methods?


The Usefulness of Accounting Allocations


Improving Accounting Standards

Chapter 10: International Accounting
National Accounting Differences

International Harmonization of Accounting Standards

Chapter 11: The Balance Sheet
The Relationship Between the Balance Sheet and the Income Statement



Owners' Equity

Financial Instruments

Classification in the Balance Sheet

Appendix 11-A: A Simple Example of a Weather Derivative

Chapter 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

Chapter 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

Chapter 14: 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 (IAS)

Improving Accounting Standards

Chapter 15: Pensions and Other Postretirement Benefits
Overview of Pension Plans

Development of Pension Accounting Standards

Postretirement Benefits Other Than Pensions

International Accounting Standards (IAS)

Improving Accounting Standards

Appendix 16-A: Illustration of Pension Expense Determination and Actuarial Funding Methods

Chapter 16: Leases
The Lease Contract

The Evolution of Lease Accounting Standards

FASB and IASB Joint Exposure Draft on Accounting for Leases

Improving Accounting Standards

Chapter 17: Intercorporate Equity Investments
Relevant Circumstances


The Equity Method

The Fair Value Method

Defining the Reporting Entity

Translation of Foreign Operations

IASB Standards

Improving Accounting Standards

Appendix 17-A: Special Purpose Entities, Variable Interest Entities, and the Downfall of Enron



Instructor Resource Site

Password-protected Instructor Resources include the following:

  • A Microsoft® Word® test bank provides you with a diverse range of pre-written options as well as the opportunity for editing any question and/or inserting your own personalized questions to effectively assess students’ progress and understanding.
  • Editable, chapter-specific Microsoft® PowerPoint® slides offer you complete flexibility in easily creating a multimedia presentation for your course.
  • An instructor's manual includes chapter highlights, answers to the end-of-chapter questions, case problems, and writing assignments.
Key features


  • Updated FASB-IASB Standards offer readers an in-depth understanding of the attempts being made to establish a high-quality set of international accounting standards, creating a unified front in finance and accounting.
  • Revised Financial Accounting Standards Board (FASB) documents provide a new conceptual framework, equipping students with the necessary tools to better understand financial reporting. 
  • New research and current statistics ensure that readers have access to real-world knowledge and applicable paradigms.
  • Student Research Questions on recent scholarship are included to engage readers in analytical thought.
  • Blackboard Question Pools to facilitate online testing.
  • Private Company Council (PCC) had been added to the FASB organizational structure to demonstrate to readers how effectiveness and communication are being enhanced.


  • Recent Accounting Standards Updates (ASU) keep readers savvy to industry development.
  • Recent International Financial Reporting Standards (IFRS) allow your students to always be up to date with leading advancements in reporting.
  • Current research findings offer readers comprehensive coverage of both theory and practice in the world of accounting and finance.
  • Top academic journals are cited to deliver a solid introduction to the challenges within international accounting.
  • Top academic journals are cited to deliver a solid introduction to the challenges within international accounting.
  • Technical aspects and issues are frequently supplemented by practical examples from sources such as The Wall Street Journal, offering readers a relevant understanding of financial accounting and its applications.

For instructors

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