Course description

Financial Accounting Theory


This course belongs to the major in Business Law, Tax and Accounting as a 1st semester compulsory course. Final class for this major is 2017-2019, and resit examinations will be planned. The course is also offered as a 3rd semester elective for Master in Accounting and Auditing. 

What is the relationship between accounting information and economic realities? This course provides insight into the fundamental functions of financial reporting and its theoretical basis.

Course content

  • History of the accounting discipline
  • Relationship with economic factors
  • Accounting models
  • The financial statement as a source of information for the capital market
  • Earnings management and other economic consequences
  • Standard setting

Learning outcome knowledge

Students shall learn about the connections between the accounting information of firms and their surroundings. This includes knowledge about how the accounts reflect the reporting firm’s financial conditions and how the accounting information is used and understood by the financial statement users. What is the content of the economic concepts of income and wealth and how do they rate to the accounting concepts of profit and equity? What is the role of financial reporting for participants in the capital market, and to what extent does financial statement information have unintended economic consequences? To what extent is financial reporting biased to meet specific objectives (earnings management)? The course also covers the history of accounting and the reasons for public regulation of financial reporting.

Exam organisation

  • Written assignment: 30%
  • Written exam: 70%