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

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

, Table of Contents gh gh




Chapter 1 Introduction ................................................................................ 1
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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 I gh gh




NTRODUCTION

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 gh




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 gh




1.12.2 Adverse Selection gh




1.12.3 Moral Hazard gh




1.12.4 Standard Setting gh




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 the s
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tudents typically have not had a chance to read Chapter 1 in the first coursesessio
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n, 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- gh gh gh gh gh gh




based accounting is natural. I go over the ideal conditions needed for
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h sucha basis of accounting to be feasible, but do not go into much det
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ail 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 problems
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are basic to the book and I feel it is desirable for the students to have
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gh a “first go” at them at this point. I concentrate on the intuition under
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lying the two problems. For example, adverse selection can be illustr
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ated by asking who would be first in line to purchase life insurance if
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h there was no medical examination, or what quality of used cars are li
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kely to be brought to market. For moral hazard I try to pin them dow
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n on how hard they would work inthis course if there were no exams.
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• 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 env
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ironment for granted. I discuss the procedures of standard setting br
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iefly and point out that this is really a process of regulation. In the p
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ast, there have been well-
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known cases of deregulation, such as airlines, trucking, financial insti
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tutions, powergeneration. However, we are entering what is likely to
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h be a period of increasing regulation, at least for financial institutions.
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hInstructors