This book began as a series of lesson notes for a fi nancial accounting theory course of the

Certifi ed General Accountants’ Association of Canada (CGA). The lesson notes grew

out of a conviction that we have learned a great deal about the role of fi nancial accounting

and reporting in our society from securities markets and information economics-based

research conducted over many years, and that fi nancial accounting theory comes into

its own when we formally recognize the information asymmetries that pervade business

relationships.

The challenge was to organize this large body of research into a unifying framework

and to explain it in such a manner that professionally oriented students would both understand

and accept it as relevant to the fi nancial accounting environment and ultimately to

their own professional careers.

This book seems to have achieved its goals. In addition to being part of the CGA program

of professional studies for a number of years, it has been extensively used in fi nancial

accounting theory courses at the University of Waterloo, Queen’s University, and numerous

other universities, both at the senior undergraduate and professional master’s levels. I am

encouraged by the fact that, by and large, students comprehend the material and, indeed,

are likely to object if the instructor follows it too closely in class. This frees up class time to

expand coverage of areas of interest to individual instructors and/or to motivate particular

topics by means of articles from the fi nancial press and professional and academic literature.