Financial Accounting Theory

Financial Accounting Theory, 8th Edition, is a textbook that connects financial reporting standards to an underlying conceptual framework. Written by William R. Scott and Patricia O'Brien, the work introduces students directly to the content of major accounting standards while examining the theory that explains them.

The text addresses core theoretical models, exploring financial reporting under ideal conditions, decision usefulness, efficient securities markets, and the value relevance of reported figures. It also investigates incentive problems, analyzing conflict, executive compensation, and earnings management alongside the economic and political forces that shape standard setting.

Published in 2020, this edition incorporates accounting standards oriented to 2018 IASB standards alongside major U.S. standards. The book critically evaluates practical topics such as fair value accounting and financial instruments, examining how standard-setting bodies secure the consent required to establish successful regulations.