Solution Manual For Financial Accounting Theory 7th Edition byWilliam R. Scott, Patricia O'Brien Chapters 1 - 13, Complete

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

, Contents


Chapterj1 Introduction.................................................................................................. 1

Chapterj2 AccountingjUnderjIdealjConditions ............................................................ 7

Chapterj3 ThejDecisionjUsefulnessjApproachjtojFinancialjReporting ......................... 68

Chapterj4 EfficientjSecuritiesjMarkets........................................................................129

Chapterj5 ThejValuejRelevancejofjAccountingjInformation........................................153

Chapterj6 ThejMeasurementjApproachjtojDecisionjUsefulness ..................................194

Chapterj7 MeasurementjApplications .........................................................................237

Chapterj8 ThejEfficientjContractingjApproachjtojDecisionjUsefulness ....................... 285

Chapterj9 AnjAnalysisjofjConflict ............................................................................ 321

Chapterj10jjExecutivejCompensation .......................................................................... 371

Chapterj11jjEarningsjManagement .............................................................................. 425

Chapterj12jjStandardjSetting:jEconomicjIssues ............................................................ 487

Chapterj13jjStandardjSetting:jPoliticaljIssues .............................................................. 527




PearsonjCanadajInc.
j

,Scott,jFinancialjAccountingjTheory Instructor’sjSolutionsjManualjChapterj1



CHAPTERj1jI

NTRODUCTION

1.1 ThejObjectivejofjThisjBook

1.2 SomejHistoricaljPerspective

1.3 Thej2007-2008jMarketjMeltdowns

1.4 EfficientjContracting

1.5 AjNotejonjEthicaljBehaviour

1.6 Rules-Basedjv.jPrinciples-BasedjAccountingjStandards

1.7 ThejComplexityjofjInformationjinjFinancialjAccountingjandjReporting

1.8 ThejRolejofjAccountingjResearch

1.9 ThejImportancejofjInformationjAsymmetry

1.10 ThejFundamentaljProblemjofjFinancialjAccountingjTheory

1.11 RegulationjasjajReactionjtojthejFundamentaljProblem

1.12 ThejOrganizationjofjThisjBook

1.12.1 IdealjConditions

1.12.2 AdversejSelection

1.12.3 MoraljHazard

1.12.4 StandardjSetting

1.12.5 ThejProcessjofjStandardjSetting

1.13 RelevancejofjFinancialjAccountingjTheoryjtojAccountingjPractice

, Scott,jFinancialjAccountingjTheory Instructor’sjSolutionsjManualjChapterj1


LEARNINGjOBJECTIVESjANDjSUGGESTEDjTEACHINGjAPPROACHES

1. ThejBroadjOutlinejofjthejBook

IjusejFigurej1.1jasjajtemplatejtojdescribejthejbroadjoutlinejofjthejbook.jSincejthejstude
ntsjtypicallyjhavejnotjhadjajchancejtojreadjChapterj1jinjthejfirstjcoursejsession,jIjstickjf
airlyjcloselyjtojthejchapterjmaterial.

ThejmajorjpointsjIjdiscussjare:

• Accountingjinjanjidealjsetting.jHere,jpresent-value-
basedjaccountingjisjnatural.jIjgojoverjthejidealjconditionsjneededjforjsu
chjajbasisjofjaccountingjtojbejfeasible,jbutjdojnotjgojintojmuchjdetailjbec
ausejthisjtopicjisjcoveredjinjgreaterjdepthjinjChapterj2.

• Anjintroductionjtojthejconceptjofjinformationjasymmetryjandjresultingjp
roblemsjofjadversejselectionjandjmoraljhazard.jThesejproblemsjarejba
sicjtojthejbookjandjIjfeeljitjisjdesirablejforjthejstudentsjtojhavejaj―firstjgo‖j
atjthemjatjthisjpoint.jIjconcentratejonjthejintuitionjunderlyingjthejtwojpro
blems.jForjexample,jadversejselectionjcanjbejillustratedjbyjaskingjwhoj
wouldjbejfirstjinjlinejtojpurchasejlifejinsurancejifjtherejwasjnojmedicaljex
amination,jorjwhatjqualityjofjusedjcarsjarejlikelyjtojbejbroughtjtojmarket.j
ForjmoraljhazardjIjtryjtojpinjthemjdownjonjhowjhardjtheyjwouldjworkjinjthi
sjcoursejifjtherejwerejnojexams.

• Thejenvironmentjinjwhichjfinancialjaccountingjandjreportingjoperates.j
Myjmainjgoaljatjthisjpointjisjthatjthejstudentsjdojnotjtakejthisjenvironme
ntjforjgranted.jIjdiscussjthejproceduresjofjstandardjsettingjbrieflyjandjp
ointjoutjthatjthisjisjreallyjajprocessjofjregulation.jInjthejpast,jtherejhavejb
eenjwell-
knownjcasesjofjderegulation,jsuchjasjairlines,jtrucking,jfinancialjinstitu
tions,jpowerjgeneration.jHowever,jwejarejenteringjwhatjisjlikelyjtojbejaj
periodjofjincreasingjregulation,jatjleastjforjfinancialjinstitutions.jInstruct
ors