Solution Manual For Financial Accounting Theory 7th Edition by William R. Scott, Patricia O'Brien Chapters 1 - 13, Complete updated version | ISBN: 9780273773436

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

, Contents


Chapter 1 pv Introduction.................................................................................................. 1

Chapter 2 Accounting Under Ideal Conditions .......................................................... 7
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Chapter 3 The Decision Usefulness Approach to Financial Reporting ...................... 68
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Chapter 4 Efficient Securities Markets.......................................................................129
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Chapter 5 The Value Relevance of Accounting Information .....................................153
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Chapter 6 The Measurement Approach to Decision Usefulness ................................ 194
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Chapter 7 Measurement Applications ........................................................................237
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Chapter 8 The Efficient Contracting Approach to Decision Usefulness .................... 285
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Chapter 9 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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,CHAPTER 1 pv pv




INTRODUCTION

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 Contractingpv




1.5 A Note on Ethical Behaviour
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1.6 Rules-Based v. Principles-Based Accounting Standards
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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 Problem
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1.12 The Organization of This Book
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1.12.1 Ideal Conditions pv




1.12.2 Adverse Selection pv




1.12.3 Moral Hazard pv




1.12.4 Standard Setting pv




1.12.5 The Process of Standard Setting
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1.13 Relevance of Financial Accounting Theory to Accounting Practice
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, LEARNING OBJECTIVES AND SUGGESTED TEACHING APPROACHES
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1. The Broad Outline of the Book
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I use Figure 1.1 as a template to describe the broad outline of the book. Since th
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e students typically have not had a chance to read Chapter 1 in the first coursese
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ssion, 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- pv pv pv pv pv pv




based accounting is natural. I go over the ideal conditions needed f
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or sucha basis of accounting to be feasible, but do not go into much
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detail because this topic is covered in greater depth in Chapter 2.
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• An introduction to the concept of information asymmetry and resulti
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ng problems of adverse selection and moral hazard. These problem
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s are basic to the book and I feel it is desirable for the students to h
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ave a “first go” at them at this point. I concentrate on the intuition un
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derlying the two problems. For example, adverse selection can be ill
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ustrated by asking who would be first in line to purchase life insuran
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ce if there was no medical examination, or what quality of used cars
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are likely to be brought to market. For moral hazard I try to pin them
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down on how hard they would work inthis course if there were no ex
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ams.

• The environment in which financial accounting and reporting operat
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es. My main goal at this point is that the students do not takethis en
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vironment for granted. I discuss the procedures of standard setting
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briefly and point out that this is really a process of regulation. In the
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past, there have been well-pv pv pv pv




known cases of deregulation, such as airlines, trucking, financial in
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stitutions, powergeneration. However, we are entering what is likely
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pv to be a period of increasing regulation, at least for financial institutio
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