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


Chapteri1 Introduction.................................................................................................. 1

Chapteri2 AccountingiUnderiIdealiConditions ........................................................... 7

Chapteri3 TheiDecisioniUsefulnessiApproachitoiFinancialiReporting ........................ 68

Chapteri4 EfficientiSecuritiesiMarkets .......................................................................129

Chapteri5 TheiValueiRelevanceiofiAccountingiInformation .......................................153

Chapteri6 TheiMeasurementiApproachitoiDecisioniUsefulness ..................................194

Chapteri7 MeasurementiApplications.........................................................................237

Chapteri8 TheiEfficientiContractingiApproachitoiDecisioniUsefulness ...................... 285

Chapteri9 AniAnalysisiofiConflict ........................................................................... 321

Chapteri10iiExecutiveiCompensation .......................................................................... 371

Chapteri11iiEarningsiManagement .............................................................................. 425

Chapteri12iiStandardiSetting:iEconomiciIssues ........................................................... 487

Chapteri13iiStandardiSetting:iPoliticaliIssues .............................................................. 527




iPearsoniCanadaiInc.

,Scott,iFinancialiAccountingiTheory Instructor’siSolutionsiManualiChapteri1



CHAPTERi1iI

NTRODUCTION

1.1 TheiObjectiveiofiThisiBook

1.2 SomeiHistoricaliPerspective

1.3 Thei2007-2008iMarketiMeltdowns

1.4 EfficientiContracting

1.5 AiNoteioniEthicaliBehaviour

1.6 Rules-Basediv.iPrinciples-BasediAccountingiStandards

1.7 TheiComplexityiofiInformationiiniFinancialiAccountingiandiReporting

1.8 TheiRoleiofiAccountingiResearch

1.9 TheiImportanceiofiInformationiAsymmetry

1.10 TheiFundamentaliProblemiofiFinancialiAccountingiTheory

1.11 RegulationiasiaiReactionitoitheiFundamentaliProblem

1.12 TheiOrganizationiofiThisiBook

1.12.1 IdealiConditions

1.12.2 AdverseiSelection

1.12.3 MoraliHazard

1.12.4 StandardiSetting

1.12.5 TheiProcessiofiStandardiSetting

1.13 RelevanceiofiFinancialiAccountingiTheoryitoiAccountingiPractice

, Scott,iFinancialiAccountingiTheory Instructor’siSolutionsiManualiChapteri1


LEARNINGiOBJECTIVESiANDiSUGGESTEDiTEACHINGiAPPROACHES

1. TheiBroadiOutlineiofitheiBook

IiuseiFigurei1.1iasiaitemplateitoidescribeitheibroadioutlineiofitheibook.iSinceitheistud
entsitypicallyihaveinotihadiaichanceitoireadiChapteri1iinitheifirsticourseisession,iIistic
kifairlyicloselyitoitheichapterimaterial.

TheimajoripointsiIidiscussiare:

• Accountingiinianiidealisetting.iHere,ipresent-value-
basediaccountingiisinatural.iIigoioveritheiidealiconditionsineedediforisu
chiaibasisiofiaccountingitoibeifeasible,ibutidoinotigoiintoimuchidetailibec
auseithisitopiciisicoverediinigreateridepthiiniChapteri2.

• Aniintroductionitoitheiconceptiofiinformationiasymmetryiandiresultingip
roblemsiofiadverseiselectioniandimoralihazard.iTheseiproblemsiareib
asicitoitheibookiandiIifeeliitiisidesirableiforitheistudentsitoihaveiai“firstigo
”iatithemiatithisipoint.iIiconcentrateionitheiintuitioniunderlyingitheitwoipr
oblems.iForiexample,iadverseiselectionicanibeiillustratedibyiaskingiwh
oiwouldibeifirstiinilineitoipurchaseilifeiinsuranceiifithereiwasinoimedicali
examination,ioriwhatiqualityiofiusedicarsiareilikelyitoibeibroughtitoimar
ket.iForimoralihazardiIitryitoipinithemidownionihowiharditheyiwouldiwork
iinithisicourseiifithereiwereinoiexams.

• Theienvironmentiiniwhichifinancialiaccountingiandireportingioperates.
i Myimainigoaliatithisipointiisithatitheistudentsidoinotitakeithisienvironme
ntiforigranted.iIidiscussitheiproceduresiofistandardisettingibrieflyiandip
ointioutithatithisiisireallyiaiprocessiofiregulation.iInitheipast,ithereihavei
beeniwell-
knownicasesiofideregulation,isuchiasiairlines,itrucking,ifinancialiinstit
utions,ipowerigeneration.iHowever,iweiareienteringiwhatiisilikelyitoibei
aiperiodiofiincreasingiregulation,iatileastiforifinancialiinstitutions.iInstru
ctors