THOMSON Boed ek ardlE Accounting Theory AHMED RIAHI-BELKAOQUI __ 5th EDITIONAhmed Riahi-Belkaoui ~ atta Sea) University of Illinois at Chicago Illinois, USA “ACCOUNTING THEORYC Q Contents Preface The history and development of accounting 1.1 Introduction 1.2. Evolution of double-entry bookkeeping 1.3 The development of accounting principles in the USA 14 Accounting and capitalism 1.5 Relevance of accounting history 1.6 Intemational accounting issues 1.7 Conclusions ‘Appendix 1.A: Major studies of the accounting profession from 1972 through 1995 Notes References The nature and uses of accounting 2.1 Definitions and role of accounting. 22 Measurement in accounting 23. The rationale behind double-entry accounting. 24 — Generally accepted accounting prineiples (GAAP) 25 Accounting policy and changes 26 Designed accouinting 27 Technical and ideological proletarianization of accountants 2.8 The manufactured consciousness of users 2.9 Ethical perspective in accounting 2.10 Conclusions Notes References The elements and structure of an accounting theory 3.1 Notions of a theory 3.2 Notions of concepts 3.3 The handling of hypotheses 34 Context of discovery 35 Conelusion Notes References 31 34 37 38 2 45 46 3B 54 7 1 n 9 % 86 92 93 93vi g 4| The traditional approaches to the formulation of an o7 z accounting theory § 4.1 Thenature of accounting: various images 98 42. Theory construction and verification 107 8 43 The nature of an accounting theory 108 4.4 Methodologies forthe formulation of an accounting theory 109 45. Approaches to the formulation of an accounting theory 110 4.6 Theeclectic approach tothe formulation of an accounting theory 116 “4.7 Conclusions 16 Notes 116 References 120 5 | The regulatory approach to the formulation of an 123 accounting theory 5,1 Tho nature of accounting standards 124 5.2 Goals of standard-setting 125 5.3. Entities cqncerned with accounting standards 127 5.4 Who should set accounting standards? 135 55 Legitimacy of the standard-setting process 144 5.6 Accounting standards overload 146 k 5.7 Accounting choice 49 5.8 Standard:-setting strategies for he developing countries, 150 5.9 Conclusions 153 Appendix 5.A: Members of International Accounting Standards Board 153 Notes 195 10 References 158 6 | A conceptual framework for financial accounting and reporting 163 6.1 Classification and conflicts of interests 164 6.2 Toward a formulation of the objectives of financial statements 165 63 Toward a conceptual framework 1B 64 — The other reports 190 65 Taxonomy of normative characteristics that accounting 197 pronouncements should reflect 6.6 Discussion and conclusions 197 Notes 202 References 205 7 | The structure of accounting theory 209 TAL The nature of the structure ofan ecounting theory 210 | "| 72 The nature ofthe accounting postuites theoretical conceptsand 241 principles - 73 The accounting postulates 212 14 The theoretical concepts of accounting 215 75 ‘The accounting principles 217 7.6 Truthin accounting 230 7.7 Conclusions 236 Appendix 7.A: The basic postalats of accounting (ARS 1) 231 ‘Appendix 7B: A tentative set of broad aecounting principles for business 238 ‘enterprises (ARS 3)7 ' Notes 241 8 . References : 2s a ing 8 | Fairness, disclosure and future trends in accounting 249 i 8.1 Introduction 249 ne 82 Faimoss in accounting 250 1 I 83 Fairness in distribution 253 ue 84 Fairmoss in disclosure 261 : 85 Gonclusion 285 ue , Notes 285 fa References 291 13 (9 [Research perspectives in accounting 209 | io [9.1 Introduction 299 | a 9.2 Perspectives on accounting researchers 300 | 3 ’ 93. Petspectives on accounting methodologies: ideography versus 308 | te nomothesis i | 9.4 Perspectives on accounting knowledge 308 | by j 915 Perspectives on accounting research 314 a j 916 Imcellectual foundations in accounting 319 “ 39 Colson a ie ; Notes 322 | 13 References 326_} ee 40 | Accounting: a multiple paradigm science 329 138 10.1 Introduction 330 a 10.2 The concept ofa paradigm 331 3 103 The anthropologicalinductive paradigm 337 he 10.4 ‘The rue-income/deductive paradigm 339 5 105. Thedacsonechinesfscsn model pigs a i 10.6 The decision-usefulness/dccision-makerlaggregate-matket-behavior 343 7 paradigm sas 10.7 The decision-uscfulness/decision-maker/individual-user paredigm 345 F 10.8 Tho information/economies paradigm 346 sid 10.9 The science of accounting 348 202 10.10 Deconstruction Ssnesesee 205 j 10.11 Acaderaie accountants: a flawed universal class 35L— 10.12. Conetusions 352 ad Notes, 354 ot References 360 i 11 | The events and behavioral approaches 363 ae LLL The events approach 364 oe 112 The behavioral approach 367 oa 11.3 The human information processing approach 32 8 114 Evaluation of the behavioral approach 383 i 115 Conclusions 383 Notes 384 References 390CONTENTS: 2 4 15 The predictive approach 12.1 The nature of tho predictive approach 12.2 Prediction ofan economic event 123 Prediction of market reaction: market-based research in accounting 12.4 Conclusions Notes References ‘The positive approach, income smoothing and earnings management 13.1. Thepositive approach 13.2. Income smoothing hypothesis 13.3 Eamings management 13.4 The paradigmatic status of accounting 135 Conclusions Notes References Current-value accounting 14.1 The relevance of the income concept 142 The traditional accounting concept of income 143 The nature of the economic concept of income 144 Concepts of capital maintenance 14.5. Concepts of current value 14.6 Conclusions Notes References: General price-level accounting 15.1. General price-level restatement of historical-cost financial statements 152 Adjusting specifi items for general price-level changes 153 The monetary-nonmonetary distinetion 154 Priceevel indices 155 A simplified illustration of general price-level indexing 15.6 Evaluation of general price-level accounting 15.7. Conclusions Notes References: Alternative asset-valuation and income-determination models 16.1 ‘The nature of the differences 16.2. Basis for comparison and evaluation 163 Illustration of the different accounting models 164 ‘Toward a solution o the problem of financial reporting and changing prices 165 Conclusions Notes Reforences 397 398, 398 408 433, 433 439 4a 441 449 456 463 465 465 4m eararee sa BEES