Solution Manual For Financial Accounting Theory 7th Edition by William 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


Chapterh1 Introduction.................................................................................................. 1

Chapterh2 AccountinghUnderhIdealhConditions........................................................... 7

Chapterh3 ThehDecisionhUsefulnesshApproachhtohFinancialhReporting ....................... 68

Chapterh4 EfficienthSecuritieshMarkets .......................................................................129

Chapterh5 ThehValuehRelevancehofhAccountinghInformation ......................................153

Chapterh6 ThehMeasurementhApproachhtohDecisionhUsefulness.................................194

Chapterh7 MeasurementhApplications ........................................................................237

Chapterh8 ThehEfficienthContractinghApproachhtohDecisionhUsefulness ..................... 285

Chapterh9 AnhAnalysishofhConflict........................................................................... 321

Chapterh10hhExecutivehCompensation ......................................................................... 371

Chapterh11hhEarningshManagement ............................................................................. 425

Chapterh12hhStandardhSetting:hEconomichIssues ......................................................... 487

Chapterh13hhStandardhSetting:hPoliticalhIssues ............................................................ 527




hPearsonhCanadahInc.

,Scott,hFinancialhAccountinghTheory Instructor’shSolutionshManualhChapterh1



CHAPTERh1h

INTRODUCTION

1.1 ThehObjectivehofhThishBook

1.2 SomehHistoricalhPerspective

1.3 Theh2007-2008hMarkethMeltdowns

1.4 EfficienthContracting

1.5 AhNotehonhEthicalhBehaviour

1.6 Rules-Basedhv.hPrinciples-BasedhAccountinghStandards

1.7 ThehComplexityhofhInformationhinhFinancialhAccountinghandhReporting

1.8 ThehRolehofhAccountinghResearch

1.9 ThehImportancehofhInformationhAsymmetry

1.10 ThehFundamentalhProblemhofhFinancialhAccountinghTheory

1.11 RegulationhashahReactionhtohthehFundamentalhProblem

1.12 ThehOrganizationhofhThishBook

1.12.1 IdealhConditions

1.12.2 AdversehSelection

1.12.3 MoralhHazard

1.12.4 StandardhSetting

1.12.5 ThehProcesshofhStandardhSetting

1.13 RelevancehofhFinancialhAccountinghTheoryhtohAccountinghPractice

, Scott,hFinancialhAccountinghTheory Instructor’shSolutionshManualhChapterh1


LEARNINGhOBJECTIVEShANDhSUGGESTEDhTEACHINGhAPPROACHES

1. ThehBroadhOutlinehofhthehBook

IhusehFigureh1.1hashahtemplatehtohdescribehthehbroadhoutlinehofhthehbook.hSincehtheh
studentshtypicallyhhavehnothhadhahchancehtohreadhChapterh1hinhthehfirsthcoursehsessi
on,hIhstickhfairlyhcloselyhtohthehchapterhmaterial.

ThehmajorhpointshIhdiscusshare:

• Accountinghinhanhidealhsetting.hHere,hpresent-value-
basedhaccountinghishnatural.hIhgohoverhthehidealhconditionshneededhfo
rhsuchhahbasishofhaccountinghtohbehfeasible,hbuthdohnothgohintohmuchhd
etailhbecausehthishtopichishcoveredhinhgreaterhdepthhinhChapterh2.

• Anhintroductionhtohthehconcepthofhinformationhasymmetryhandhresultin
ghproblemshofhadversehselectionhandhmoralhhazard.hThesehproblemsh
arehbasichtohthehbookhandhIhfeelhithishdesirablehforhthehstudentshtohhave
hah―firsthgo‖haththemhaththishpoint.hIhconcentratehonhthehintuitionhunderly
inghthehtwohproblems.hForhexample,hadversehselectionhcanhbehillustrat
edhbyhaskinghwhohwouldhbehfirsthinhlinehtohpurchasehlifehinsurancehifhth
erehwashnohmedicalhexamination,horhwhathqualityhofhusedhcarsharehlik
elyhtohbehbroughthtohmarket.hForhmoralhhazardhIhtryhtohpinhthemhdownh
onhhowhhardhtheyhwouldhworkhinhthishcoursehifhtherehwerehnohexams.

• Thehenvironmenthinhwhichhfinancialhaccountinghandhreportinghoperat
es.hMyhmainhgoalhaththishpointhishthaththehstudentshdohnothtakehthishenv
ironmenthforhgranted.hIhdiscusshthehprocedureshofhstandardhsettinghbr
ieflyhandhpointhouththaththishishreallyhahprocesshofhregulation.hInhthehpa
st,htherehhavehbeenhwell-
knownhcaseshofhderegulation,hsuchhashairlines,htrucking,hfinancialhins
titutions,hpowerhgeneration.hHowever,hweharehenteringhwhathishlikelyht
ohbehahperiodhofhincreasinghregulation,hathleasthforhfinancialhinstitution
s.hInstructors