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

SolutionManualForFinancialAccountingTheory 7th
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Edition byWilliamR. Scott,PatriciaO'Brien Chapters
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n1-13,Complete
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, Contents


Chapter1 n Introduction .................................................................................................. 1

Chapter2 n AccountingdUnderIdealConditions ............................................................. 7
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Chapter3 n TheDecisionUsefulnessApproachtoFinancialReporting ............................ 68
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Chapter4 n EfficientSecuritiesMarkets ......................................................................... 129
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Chapter5 n TheValueRelevanceofAccountingInformation .......................................... 153
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Chapter6 n TheMeasurementApproachtodDecisionUsefulness .................................... 194
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Chapter7 n MeasurementApplications.......................................................................... 237
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Chapter8 n TheEfficientContractingApproachtoDecisionUsefulness .......................... 285
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Chapter9 n AnAnalysisofConflict .............................................................................. 321
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Chapter10 ExecutiveCompensation ............................................................................ 371
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Chapter11 EarningsManagement................................................................................ 425
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Chapter12 StandardSetting:EconomicIssues .............................................................. 487
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Chapter13 StandardSetting:PoliticalIssues ................................................................. 527
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Pearson Canada Inc. n n

,Scott,FinancialAccountingTheory
n n n Instructor’sSolutionsManualChapter1
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CHAPTER 1 N




N INTRODUCTION

1.1 TheObjectiveofThisBook
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1.2 SomeHistoricalPerspective
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1.3 The2007-2008MarketMeltdowns
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1.4 Efficient Contracting n




1.5 ANoteonEthicalBehaviour
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1.6 Rules-Based v. Principles-Based AccountingStandards n n n n




1.7 TheComplexityofInformationin FinancialAccountingandReporting
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1.8 TheRoleofAccountingResearch
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1.9 TheImportanceof Information Asymmetry
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1.10 TheFundamentalProblem ofFinancialAccountingTheory
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1.11 RegulationasaReactiontotheFundamentalProblem n n n n n n n




1.12 TheOrganizationofThisBook
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1.12.1 IdealConditions n




1.12.2 AdverseSelection n




1.12.3 MoralHazard n




1.12.4 Standard Setting n




1.12.5 TheProcessofStandardSetting n n n n




1.13 Relevance of FinancialAccountingTheoryto Accounting Practice
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, Scott,FinancialAccountingTheory
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LEARNING OBJECTIVES ANDSUGGESTED TEACHING APPROACHES
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1. TheBroadOutlineoftheBook
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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 notdhad a chance to read Chapter 1 in the firstdcoursesessi on, I
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stick fairly closely to the chapter material.
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ThemajorpointsIdiscussare:
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• Accountinginanidealsetting.Here,present-value- n n n n n n




based accounting is natural. I go over the ideal conditions needed fo n n n n n n n n n n n




r sucha basis of accounting to be feasible, butddo not go into much d etail
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because this topicis covered in greaterdepth in Chapter2.
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• Anintroductiontotheconceptofinformationasymmetryandresultin g
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problems ofadverseselection andmoralhazard. These problems
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arebasictothebookdandIfeelitisdesirableforthestudentstohave a―first
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go‖atthematthispoint.Iconcentrateontheintuitionunderly
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ingthetwoproblems.Forexample,adverseselectioncanbeillustrat edby
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askingwhowouldbefirstinlinetopurchaselifeinsuranceifth ere was no
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medical examination, orwhat quality of used carsare lik ely to be brought
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tomarket. For moralhazard Itryto pin them down on howhard theywould
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n work inthis course if there were no exams. n n n n n n n




• The environment in which financial accounting and reporting operat
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es. My main goal at this point is thatdthe 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 thatdthis is really a process of regulation. In the pa st,
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there have been well-
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known cases of deregulation, such as airlines, trucking, financial ins n n n n n n n n n




titutions, powergeneration. However, we are entering whatdis likely t
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obeaperiodofincreasingregulation,atleastforfinancialinstitution
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s.Instructorsn