Solution Manual for Financial Accounting Theory 8th Edition by William Scott, Patricia O'Brien ||Complete A+ Guide

, Contents


Chapter 1 F Introduction ............................................................................................................ 1

Chapter 2 F Accounting Under Ideal Conditions ................................................................... 7
F F F




Chapter 3 F The Decision Usefulness Approach to Financial Reporting................................68
F F F F F F




Chapter 4 F Efficient Securities Markets ................................................................................. 129
F F




Chapter 5 F The Value Relevance of Accounting Information ............................................... 153
F F F F F




Chapter 6 F The Measurement Approach to Decision Usefulness .......................................... 194
F F F F F




Chapter 7 F Measurement Applications ................................................................................... 237
F




Chapter 8 F The Efficient Contracting Approach to Decision Usefulness .............................. 285
F F F F F F




Chapter 9 F An Analysis of Conflict .................................................................................... 321
F F F




Chapter 10 Executive Compensation .................................................................................... 371
F FF F




Chapter 11 Earnings Management ........................................................................................ 425
F FF F




Chapter 12 Standard Setting: Economic Issues .................................................................... 487
F FF F F F




Chapter 13 Standard Setting: Political Issues ....................................................................... 527
F FF F F F

,Scott, FFinancial FAccounting FTheory, F8th FEdition Instructor’s FSolutions FManual FChapter
F1




CHAPTER 1 F




INTRODUCTION
F




1.1 The Objective of This Book
F F F F




1.2 Some Historical Perspective
F F




1.3 The 2007-2008 Market Meltdowns
F F F




1.4 Efficient Contracting
F




1.5 A Note on Ethical Behaviour
F F F F




1.6 Rules-Based v. Principles-Based Accounting Standards
F F F F




1.7 The Complexity of Information in Financial Accounting and Reporting
F F F F F F F F




1.8 The Role of Accounting Research
F F F F




1.9 The Importance of Information Asymmetry
F F F F




1.10 The Fundamental Problem of Financial Accounting Theory
F F F F F F




1.11 Regulation as a Reaction to the Fundamental Problem
F F F F F F F




1.12 The Organization of This Book
F F F F




1.12.1 Ideal Conditions F




1.12.2 Adverse Selection F




1.12.3 Moral Hazard F




1.12.4 Standard Setting F




1.12.5 The Process of Standard Setting
F F F F




1.13 Relevance of Financial Accounting Theory to Accounting Practice
F F F F F F F

, Scott, FFinancial FAccounting FTheory, F8th FEdition Instructor’s FSolutions FManual FChapter
F1



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
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students typically have not had a chance to read Chapter 1 in the first coursesession,
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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-based accounting is
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natural. I go over the ideal conditions needed for sucha basis of
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accounting to be feasible, but do not go into much detail because this
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topic is covered in greater depth in Chapter 2.
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• An introduction to the concept of information asymmetry and resulting
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problems of adverse selection and moral hazard. These problems are
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basic to the book and I feel it is desirable for the students to have a
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“first go” at them at this point. I concentrate on the intuition underlying
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the two problems. For example, adverse selection can be illustrated by
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asking who would be first in line to purchase life insurance if there was
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no medical examination, or what quality of used cars are likely to be
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brought to market. For moral hazard I try to pin them down on how hard
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they would work inthis course if there were no exams.
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• The environment in which financial accounting and reporting operates.
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My main goal at this point is that the students do not takethis
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environment 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-known cases of deregulation, such as
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airlines, trucking, financial institutions, powergeneration. However, we
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are entering what is likely to be a period of increasing regulation, at
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least for financial institutions. Instructors
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