TITLE : FINANCIAL ACCOUNTING AND REPORTING.

Financial accounting is undergoing a continuing process of questioning, reappraisal and exchange. The content of financial reports is being subjected to ongoing discussion and there as a tension between the preparers, the users, the auditors and academic accountants. This is mirrored in the tension that exists between theory and practice.

Preparers favour reports that are based on historic transactions that are readily recorded and do not provide shareholders or competitors with a basis for holding them accountable; users favour reports that are based on forecast transactions that are relevant in estimating future dividends; auditors favour reports that are verifiable so that the figures can be substantiated to avoid them being proved wrong at a later date; academic accountants if favour reports that reflect economic reality and are relevant either in appraising the performance of the management or in assessing the capacity of the company to adapt.

In order to understand the tensions that exist, students need to acquire the skill to prepare financial statements in accordance with the historic cost convention currently followed by the preparers of financial reports; an awareness of the reporting practices followed by public companies whose financial reports form part of investment decisions; an understanding of the degree of flexibility available to the preparer of financial reports and the impact of this on reported earnings and balance sheet figures; an understanding of the limitations of these financial reports in portraying economic reality; an exposure to source material and broad reading of major texts in so far as time permits.

The text seeks to provide students with the tools to be able to appraise current practice critically and to evaluate proposed changes from a theoretical base. It endeavours to provide the framework for a student to acquire skills and to develop a critical capability.

Each chapter is supported by references; where possible illustrations have been provided from published accounts; discussion questions and exercises have been carefully selected from academic and professional sources.

It has been assumed that the reader will have an understanding of financial accounting and reporting to a foundation or first-year level but the text and exercises have been designed on the basis that a brief revision is still helpful.

Assistance has been generously given by colleagues in the preparation and review of the text and exercises.

Thanks are particularly due to: Keith Brown and Steve Dungworth of De Montfort

University, Walter Hamilton of Sandwell College and John Morley of Brighton University for inputs; Sue McDermott of London Guildhall University, Alan Millichamp, M. Moorhouse of Rank Hovis McDougall plc, J.K.M. Smith, Group Accountant of Louis Newmark plc, Andrew Strickland of Scrutton Bland Chanered Accountants, Manin Tuffy of Nonhbrook College and Ken Trunkfield for valued review comments; the ASB, the Chanered Association of Cenified Accountants, the Chanered Institute of Management Accountants, Grant Thornton Chanered Accountants, The Hambro Performance Ranking Guide and ICC Business Ratios Ltd for permission to reproduce material. We would also like to thank the authors of some of the end-of-chapter exercises-some have been inherited from a variety of institutions with which we have been associated and we have unfonunately lost the identities of the original authors of such examples over the passage of time. We are sorry that we cannot acknowledge them by name and hope they will excuse us for using their material: the book would not be as good without it.

We are indebted to Sue Brown for word-processing original drafts and to Cathy Peck and Alison Stanford of Prentice Hall International for keeping us to schedule and being responsible for convening rough manuscript into an attractively presented text.

Finally, we thank our wives Di and Jacklin for their good humoured support during the period of writing and Giles Elliott for his critical comment at the commencement the project.

The authors alone remain responsible for any errors and the thoughts and views expressed.

Barry and Jamie Elliott