Solution Manual For Financial Accounting Theory 7th Edition by William R. Scott, Patricia O'Brien All Chapters 1 to 13 complete Verified editon ISBN: 9780273773436

Solution Manual For Financial Accounting Theory 7th
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m/y Edition by William R. Scott, Patricia O'Brien Chapters
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m/y 1 - 13, Complete
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, Contents


Chapter 1 m/y Introduction.................................................................................................. 1

Chapter 2 m/y Accounting Under Ideal Conditions ........................................................... 7
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Chapter 3 m/y The Decision Usefulness Approach to Financial Reporting ........................ 68
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Chapter 4 m/y Efficient Securities Markets ....................................................................... 129
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Chapter 5 m/y The Value Relevance of Accounting Information ....................................... 153
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Chapter 6 m/y The Measurement Approach to Decision Usefulness .................................. 194
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Chapter 7 m/y Measurement Applications......................................................................... 237
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Chapter 8 m/y The Efficient Contracting Approach to Decision Usefulness ...................... 285
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Chapter 9 m/y An Analysis of Conflict ............................................................................321
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Chapter 10 Executive Compensation ...........................................................................371
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Chapter 11 Earnings Management ...............................................................................425
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Chapter 12 Standard Setting: Economic Issues ............................................................487
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Chapter 13 Standard Setting: Political Issues ...............................................................527
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Pearson Canada Inc.
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,Scott, Financial Accounting Theory
m/y m/y m/y Instructor’s Solutions Manual Chapter 1
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CHAPTER 1 m/y




m/y INTRODUCTIO

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1.1 The Objective of This Book
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1.2 Some Historical Perspective
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1.3 The 2007-2008 Market Meltdowns
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1.4 Efficient Contracting m/y




1.5 A Note on Ethical Behaviour
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1.6 Rules-Based v. Principles-Based Accounting Standards m/y m/y m/y m/y




1.7 The Complexity of Information in Financial Accounting and Reporting
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1.8 The Role of Accounting Research
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1.9 The Importance of Information Asymmetry
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1.10 The Fundamental Problem of Financial Accounting Theory
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1.11 Regulation as a Reaction to the Fundamental Problemm/y m/y m/y m/y m/y m/y m/y




1.12 The Organization of This Book
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1.12.1 Ideal Conditions m/y




1.12.2 Adverse Selection m/y




1.12.3 Moral Hazard m/y




1.12.4 Standard Setting m/y




1.12.5 The Process of Standard Setting m/y m/y m/y m/y




1.13 Relevance of Financial Accounting Theory to Accounting Practice
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, Scott, Financial Accounting Theory
m/y m/y m/y Instructor’s Solutions Manual Chapter 1 m/y m/y m/y m/y




LEARNING OBJECTIVES AND SUGGESTED TEACHING APPROACHES
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1. The Broad Outline of the Book m/y m/y m/y m/y m/y




I use Figure 1.1 as a template to describe the broad outline of the book. Since the
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m/y students typically have not had a chance to read Chapter 1 in the first course
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session, I stick fairly closely to the chapter material.
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The major points I discuss are:
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• Accounting in an ideal setting. Here, present-value-based accounting m /y m/y m/y m/y m/y m/y m /y




m/y is natural. I go over the ideal conditions needed for sucha basis of
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m/y accounting to be feasible, but do not go into much detail because this m/y m /y m /y m /y m /y m /y m /y m /y m /y m /y m/y m/y




m/y topic is covered in greater depth in Chapter 2. m/y m/y m/y m /y m/y m/y m/y m/y




• An introduction to the concept of information asymmetry and resulting
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m/y problems of adverse selection and moral hazard. These problems are m /y m/y m/y m/y m/y m /y m/y m/y m /y




m/y basic to the book and I feel it is desirable for the students to have a
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m/y “first go” at them at this point. I concentrate on the intuition underlying
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m/y the two problems. For example, adverse selection can be illustrated
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m/y by asking who would be first in line to purchase life insurance if there
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m/y was no medical examination, or what quality of used cars are likely to
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m/y be brought to market. For moral hazard I try to pin them down on how
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m/y hard they would work inthis course if there were no exams.
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• The environment in which financial accounting and reporting
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m/y operates. My main goal at this point is that the students do not take m/y m/y m /y m /y m/y m/y m /y m/y m/y m/y m/y m /y m/y




this environment for granted. I discuss the procedures of standard
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m/y setting briefly and point out that this is really a process of regulation.
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m/y In the past, there have been well-known cases of deregulation, such
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m/y as airlines, trucking, financial institutions, powergeneration.
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m/y However, we are entering what is likely to be a period of increasing m/y m /y m /y m/y m/y m/y m /y m/y m/y m/y m /y m/y




m/y regulation, at least for financial institutions. Instructors m/y m/y m/y m/y m/y m/y