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

Pearson Canada Inc.

, Contents


ChapterQ1 Introduction.................................................................................................. 1

ChapterQ2 AccountingQUnderQIdealQConditions ...................................................... 7

ChapterQ3 TheQDecisionQUsefulnessQApproachQtoQFinancialQReporting .............68

ChapterQ4 EfficientQSecuritiesQMarkets ....................................................................129

ChapterQ5 TheQValueQRelevanceQofQAccountingQInformation .............................. 153

ChapterQ6 TheQMeasurementQApproachQtoQDecisionQUsefulness ......................... 194

ChapterQ7 MeasurementQApplications .......................................................................237

ChapterQ8 TheQEfficientQContractingQApproachQtoQDecisionQUsefulness ...........285

ChapterQ9 AnQAnalysisQofQConflict ...................................................................... 321

ChapterQ10QQExecutiveQCompensation .................................................................. 371

ChapterQ11QQEarningsQManagement ...................................................................... 425

ChapterQ12QQStandardQSetting:QEconomicQIssues ................................................ 487

ChapterQ13QQStandardQSetting:QPoliticalQIssues................................................... 527




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,Scott, Financial Accounting Theory Instructor’s Solutions Manual Chapter 1



CHAPTERQ1

QINTRODUCTIO


N

1.1 TheQObjectiveQofQThisQBook

1.2 SomeQHistoricalQPerspective

1.3 TheQ2007-2008QMarketQMeltdowns

1.4 EfficientQContracting

1.5 AQNoteQonQEthicalQBehaviour

1.6 Rules-BasedQv.QPrinciples-BasedQAccountingQStandards

1.7 TheQComplexityQofQInformationQinQFinancialQAccountingQandQReporting

1.8 TheQRoleQofQAccountingQResearch

1.9 TheQImportanceQofQInformationQAsymmetry

1.10 TheQFundamentalQProblemQofQFinancialQAccountingQTheory

1.11 RegulationQasQaQReactionQtoQtheQFundamentalQProblem

1.12 TheQOrganizationQofQThisQBook

1.12.1 IdealQConditions

1.12.2 AdverseQSelection

1.12.3 MoralQHazard

1.12.4 StandardQSetting

1.12.5 TheQProcessQofQStandardQSetting

1.13 RelevanceQofQFinancialQAccountingQTheoryQtoQAccountingQPractice

, Scott, Financial Accounting Theory Instructor’s Solutions Manual Chapter 1


LEARNINGQOBJECTIVESQANDQSUGGESTEDQTEACHINGQAPPROACHES

1. TheQBroadQOutlineQofQtheQBook

IQuseQFigureQ1.1QasQaQtemplateQtoQdescribeQtheQbroadQoutlineQofQtheQbo
ok.QSinceQtheQstudentsQtypicallyQhaveQnotQhadQaQchanceQtoQreadQChapte
rQ1QinQtheQfirstQcourseQsession,QIQstickQfairlyQcloselyQtoQtheQchapterQmater
ial.

TheQmajorQpointsQIQdiscussQare:

• AccountingQinQanQidealQsetting.QHere,Qpresent-value-
basedQaccountingQisQnatural.QIQgoQoverQtheQidealQconditionsQ
neededQforQsuchQaQbasisQofQaccountingQtoQbeQfeasible,QbutQd
oQnotQgoQintoQmuchQdetailQbecauseQthisQtopicQisQcoveredQinQ
greaterQdepthQinQChapterQ2.

• AnQintroductionQtoQtheQconceptQofQinformationQasymmetryQand
QresultingQproblemsQofQadverseQselectionQandQmoralQhazard.Q

TheseQproblemsQareQbasicQtoQtheQbookQandQIQfeelQitQisQdesir
ableQforQtheQstudentsQtoQhaveQaQ“firstQgo”QatQthemQatQthisQp
oint.QIQconcentrateQonQtheQintuitionQunderlyingQtheQtwoQproble
ms.QForQexample,QadverseQselectionQcanQbeQillustratedQbyQas
kingQwhoQwouldQbeQfirstQinQlineQtoQpurchaseQlifeQinsuranceQif
QthereQwasQnoQmedicalQexamination,QorQwhatQqualityQofQused

QcarsQareQlikelyQtoQbeQbroughtQtoQmarket.QForQmoralQhazardQ

IQtryQtoQpinQthemQdownQonQhowQhardQtheyQwouldQworkQinQthi
sQcourseQifQthereQwereQnoQexams.

• TheQenvironmentQinQwhichQfinancialQaccountingQandQreporting
Qoperates.QMyQmainQgoalQatQthisQpointQisQthatQtheQstudentsQ

doQnotQtakeQthisQenvironmentQforQgranted.QIQdiscussQtheQproc
eduresQofQstandardQsettingQbrieflyQandQpointQoutQthatQthisQisQ
reallyQaQprocessQofQregulation.QInQtheQpast,QthereQhaveQbeen