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Preface

In July 2002, the Financial Reporting Council of the Australian government decided that, from
January 2005, Australian entities should adopt accounting standards equivalent to those issued by the International Accounting Standards Board (IASB). As an integral part of issuing these standards, the Australian Accounting Standards Board (AASB) also adopted the IASB's Framework for the Preparation and Presentation of Financial Statements, to replace Statements of Accounting Concepts 3 and 4. These decisions significantly affected our previous work and caused us to rethink the content of the book as a whole, with a view to adding new chapters and deleting those which perhaps are less used in universities around Australia.

The 6th edition is substantially different from previous editions:

  • There are new chapters on:
    • property, plant and equipment, following AASB 116 Property, Plant and Equipment
    • intangible assets, following AASB 138 Intangible Assets
    • impairment of assets, following AASB 136 Impairment of Assets.
  • New sections are included on the regulation of companies and on the impact of the definitions contained in the IASB's Framework for external and internal reporting by companies. Particular attention has been paid to the definitions of income and revenue as contained in the Framework and in AASB 118 Revenue.
  • There are revised chapters on:
    • accounting for income tax following AASB 112 Income Taxes, using the balance sheet approach
    • accounting for the acquisition of assets and entities, following AASB 3 Business Combinations
    • consolidated financial statements, following AASB 127 Consolidated and Separate Financial Statements.
  • Four chapters are devoted to external financial reporting and have been amended to include not only the balance sheet and income statement under AASB 101 Presentation of Financial Statements but also the statement of changes in equity. The chapter on cashflow statements has been amended to be consistent with the application of AASB 107 Cash Flow Statements. Other accounting standards considered in detail in the area of disclosure are AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors, AASB 110 Events after the Balance Sheet Date and AASB 1031 Materiality.
  • The treatment of dividends declared and paid by a company has been amended significantly to reflect the change in policy as to when such dividends become liabilities.
  • Chapters have been rearranged to provide a more logical flow of ideas, particularly with the inclusion of new material — for example, the chapter on liquidation is now placed at the end of the text.
    Besides the changes to content, other pedagogical changes are:
  • a more accessible and student-friendly writing style
  • new chapter organisation, ensuring students are not overwhelmed by the more challenging
  • aspects of company accounting
  • structured and achievable learning objectives set out for each chapter
  • new graded end-of-chapter material enhancing the existing range and diversity of exercises and problems, with a star rating system to indicate the degree of difficulty
  • end-of-chapter summaries and key terms, with a glossary at the back of the book to reinforce student learning.

    In writing the new edition, we were careful to retain what we consider are the strengths and hallmarks of this book:
  • Attention to detail. Students are expected to learn key concepts and definitions and to use the terms in the accounting standards when considering issues and writing reports.
  • Practical application of accounting standards. Students must be able to apply accounting standards. Illustrative examples are used to demonstrate practical application, and extensive problems and exercises are available for student practice.
  • Conceptual basis. It is not sufficient for students to learn practical examples by rote. To be able to apply accounting standards in unseen situations, students must understand the rationale behind the standards. This book emphasises the conceptual rationale behind the practice of accounting.
  • Depth of analysis. Many current books and courses cover only the very simplest of practical situations, which are not representative of real-world practice. We have provided a variety of practical situations in which an accounting standard may be applied. This increases the complexity of the book, but makes the learning appropriate for future employment. By adopting a modular approach, particularly in the areas of external reporting and consolidated financial statements, the book enables teachers and students to learn progressively or selectively.
In writing this book, we have relied on the assistance and support of many people. In particular, we are grateful for the assistance of our colleagues at Curtin University of Technology, particularly Associate Professor Pat Addison and Siân Flynne, who have provided continued encouragement and help. Thanks must also be extended to the many practitioners, the members of the AASB and the technical staff of the AASB who provide continuous support and cause us to re-evaluate our work. Similarly, the Accounting Standards Interest Group and those who attend its annual Accounting Standards Forum encourage us in our learning and teaching of accounting.

This edition contains all the new terminology associated with international accounting standards. It also contains many quotations from the standards themselves. Coming to grips with the terminology and the seemingly endless revisions to paragraph numbers and content has been the unenviable task of our editor, Jan Whelan. We gratefully acknowledge her dedication, persistence and attention to detail. The encouragement from the staff of John Wiley throughout the project has been a source of inspiration to continue with the task.

The amount of change in this edition has meant less time spent with our families, and we express our appreciation to them, especially our spouses, Marja, Kathy, Margaret and Rob, for their support, patience and much-needed clerical assistance.

The adoption of international accounting standards in Australia offers new challenges to students of accounting. As with previous editions, we hope that this edition provides you with an essential tool in the learning process.
Ken Leo
John Hoggett
John Sweeting
Jennie Radford