Solution Manual For Financial Accounting Theory
y y y y y
y7th Edition by William R. Scott, Patricia O'Brien
y y y y y y y
Chapters 1 - 13, Complete
y y y y y
, Contents
Chapter y1 Introduction.................................................................................................. 1
Chapter y2 Accounting yUnder yIdeal yConditions ......................................................... 7
Chapter y3 The yDecision yUsefulness yApproach yto yFinancial yReporting .................... 68
Chapter y4 Efficient ySecurities yMarkets ......................................................................129
Chapter y5 The yValue yRelevance yof yAccounting yInformation ....................................153
Chapter y6 The yMeasurement yApproach yto yDecision yUsefulness............................... 194
Chapter y7 Measurement yApplications ........................................................................237
Chapter y8 The yEfficient yContracting yApproach yto yDecision yUsefulness .................. 285
Chapter y9 An yAnalysis yof yConflict ......................................................................... 321
Chapter y10 y yExecutive yCompensation ....................................................................... 371
Chapter y11 y yEarnings yManagement ........................................................................... 425
Chapter y12 y yStandard ySetting: yEconomic yIssues ....................................................... 487
Chapter y13 y yStandard ySetting: yPolitical yIssues .......................................................... 527
yPearson yCanada yInc.
,Scott, yFinancial yAccounting yTheory Instructor’s ySolutions yManual yChapter
y1
CHAPTER y1
INTRODUCTIO
y
N
1.1 The yObjective yof yThis yBook
1.2 Some yHistorical yPerspective
1.3 The y2007-2008 yMarket yMeltdowns
1.4 Efficient yContracting
1.5 A yNote yon yEthical yBehaviour
1.6 Rules-Based yv. yPrinciples-Based yAccounting yStandards
1.7 The yComplexity yof yInformation yin yFinancial yAccounting yand yReporting
1.8 The yRole yof yAccounting yResearch
1.9 The yImportance yof yInformation yAsymmetry
1.10 The yFundamental yProblem yof yFinancial yAccounting yTheory
1.11 Regulation yas ya yReaction yto ythe yFundamental yProblem
1.12 The yOrganization yof yThis yBook
1.12.1 Ideal yConditions
1.12.2 Adverse ySelection
1.12.3 Moral yHazard
1.12.4 Standard ySetting
1.12.5 The yProcess yof yStandard ySetting
1.13 Relevance yof yFinancial yAccounting yTheory yto yAccounting yPractice
, Scott, yFinancial yAccounting yTheory Instructor’s ySolutions yManual yChapter
y1
LEARNING yOBJECTIVES yAND ySUGGESTED yTEACHING yAPPROACHES
1. The yBroad yOutline yof ythe yBook
I yuse yFigure y1.1 yas ya ytemplate yto ydescribe ythe ybroad youtline yof ythe ybook. ySince
y the ystudents ytypically yhave ynot yhad ya ychance yto yread yChapter y1 yin ythe yfirst
y courseysession, yI ystick yfairly yclosely yto ythe ychapter ymaterial.
The ymajor ypoints yI ydiscuss yare:
• Accounting yin yan yideal ysetting. yHere, ypresent-value-based
yaccounting yis ynatural. yI ygo yover ythe yideal yconditions yneeded yfor
ysuchya ybasis yof yaccounting yto ybe yfeasible, ybut ydo ynot ygo yinto ymuch
ydetail ybecause ythis ytopic yis ycovered yin ygreater ydepth yin yChapter y2.
• An yintroduction yto ythe yconcept yof yinformation yasymmetry yand
yresulting yproblems yof yadverse yselection yand ymoral yhazard. yThese
yproblems yare ybasic yto ythe ybook yand yI yfeel yit yis ydesirable yfor ythe
ystudents yto yhave ya y“first ygo” yat ythem yat ythis ypoint. yI yconcentrate yon
ythe yintuition yunderlying ythe ytwo yproblems. yFor yexample, yadverse
yselection ycan ybe yillustrated yby yasking ywho ywould ybe yfirst yin yline yto
ypurchase ylife yinsurance yif ythere ywas yno ymedical yexamination, yor
ywhat yquality yof yused ycars yare ylikely yto ybe ybrought yto ymarket. yFor
ymoral yhazard yI ytry yto ypin ythem ydown yon yhow yhard ythey ywould ywork
yinythis ycourse yif ythere ywere yno yexams.
• The yenvironment yin ywhich yfinancial yaccounting yand yreporting
yoperates. yMy ymain ygoal yat ythis ypoint yis ythat ythe ystudents ydo ynot
ytakeythis yenvironment yfor ygranted. yI ydiscuss ythe yprocedures yof
ystandard ysetting ybriefly yand ypoint yout ythat ythis yis yreally ya yprocess
yof yregulation. yIn ythe ypast, ythere yhave ybeen ywell-known ycases yof
yderegulation, ysuch yas yairlines, ytrucking, yfinancial yinstitutions,
ypowerygeneration. yHowever, ywe yare yentering ywhat yis ylikely yto ybe ya
yperiod yof yincreasing yregulation, yat yleast yfor yfinancial yinstitutions.
y y y y y
y7th Edition by William R. Scott, Patricia O'Brien
y y y y y y y
Chapters 1 - 13, Complete
y y y y y
, Contents
Chapter y1 Introduction.................................................................................................. 1
Chapter y2 Accounting yUnder yIdeal yConditions ......................................................... 7
Chapter y3 The yDecision yUsefulness yApproach yto yFinancial yReporting .................... 68
Chapter y4 Efficient ySecurities yMarkets ......................................................................129
Chapter y5 The yValue yRelevance yof yAccounting yInformation ....................................153
Chapter y6 The yMeasurement yApproach yto yDecision yUsefulness............................... 194
Chapter y7 Measurement yApplications ........................................................................237
Chapter y8 The yEfficient yContracting yApproach yto yDecision yUsefulness .................. 285
Chapter y9 An yAnalysis yof yConflict ......................................................................... 321
Chapter y10 y yExecutive yCompensation ....................................................................... 371
Chapter y11 y yEarnings yManagement ........................................................................... 425
Chapter y12 y yStandard ySetting: yEconomic yIssues ....................................................... 487
Chapter y13 y yStandard ySetting: yPolitical yIssues .......................................................... 527
yPearson yCanada yInc.
,Scott, yFinancial yAccounting yTheory Instructor’s ySolutions yManual yChapter
y1
CHAPTER y1
INTRODUCTIO
y
N
1.1 The yObjective yof yThis yBook
1.2 Some yHistorical yPerspective
1.3 The y2007-2008 yMarket yMeltdowns
1.4 Efficient yContracting
1.5 A yNote yon yEthical yBehaviour
1.6 Rules-Based yv. yPrinciples-Based yAccounting yStandards
1.7 The yComplexity yof yInformation yin yFinancial yAccounting yand yReporting
1.8 The yRole yof yAccounting yResearch
1.9 The yImportance yof yInformation yAsymmetry
1.10 The yFundamental yProblem yof yFinancial yAccounting yTheory
1.11 Regulation yas ya yReaction yto ythe yFundamental yProblem
1.12 The yOrganization yof yThis yBook
1.12.1 Ideal yConditions
1.12.2 Adverse ySelection
1.12.3 Moral yHazard
1.12.4 Standard ySetting
1.12.5 The yProcess yof yStandard ySetting
1.13 Relevance yof yFinancial yAccounting yTheory yto yAccounting yPractice
, Scott, yFinancial yAccounting yTheory Instructor’s ySolutions yManual yChapter
y1
LEARNING yOBJECTIVES yAND ySUGGESTED yTEACHING yAPPROACHES
1. The yBroad yOutline yof ythe yBook
I yuse yFigure y1.1 yas ya ytemplate yto ydescribe ythe ybroad youtline yof ythe ybook. ySince
y the ystudents ytypically yhave ynot yhad ya ychance yto yread yChapter y1 yin ythe yfirst
y courseysession, yI ystick yfairly yclosely yto ythe ychapter ymaterial.
The ymajor ypoints yI ydiscuss yare:
• Accounting yin yan yideal ysetting. yHere, ypresent-value-based
yaccounting yis ynatural. yI ygo yover ythe yideal yconditions yneeded yfor
ysuchya ybasis yof yaccounting yto ybe yfeasible, ybut ydo ynot ygo yinto ymuch
ydetail ybecause ythis ytopic yis ycovered yin ygreater ydepth yin yChapter y2.
• An yintroduction yto ythe yconcept yof yinformation yasymmetry yand
yresulting yproblems yof yadverse yselection yand ymoral yhazard. yThese
yproblems yare ybasic yto ythe ybook yand yI yfeel yit yis ydesirable yfor ythe
ystudents yto yhave ya y“first ygo” yat ythem yat ythis ypoint. yI yconcentrate yon
ythe yintuition yunderlying ythe ytwo yproblems. yFor yexample, yadverse
yselection ycan ybe yillustrated yby yasking ywho ywould ybe yfirst yin yline yto
ypurchase ylife yinsurance yif ythere ywas yno ymedical yexamination, yor
ywhat yquality yof yused ycars yare ylikely yto ybe ybrought yto ymarket. yFor
ymoral yhazard yI ytry yto ypin ythem ydown yon yhow yhard ythey ywould ywork
yinythis ycourse yif ythere ywere yno yexams.
• The yenvironment yin ywhich yfinancial yaccounting yand yreporting
yoperates. yMy ymain ygoal yat ythis ypoint yis ythat ythe ystudents ydo ynot
ytakeythis yenvironment yfor ygranted. yI ydiscuss ythe yprocedures yof
ystandard ysetting ybriefly yand ypoint yout ythat ythis yis yreally ya yprocess
yof yregulation. yIn ythe ypast, ythere yhave ybeen ywell-known ycases yof
yderegulation, ysuch yas yairlines, ytrucking, yfinancial yinstitutions,
ypowerygeneration. yHowever, ywe yare yentering ywhat yis ylikely yto ybe ya
yperiod yof yincreasing yregulation, yat yleast yfor yfinancial yinstitutions.
