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

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

, Contents


Chapter1 j Introduction .................................................................................................. 1

Chapter2 j AccountingdUnderIdealConditions ............................................................. 7
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Chapter3 j TheDecisionUsefulnessApproachtoFinancialReporting ............................ 68
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Chapter4 j EfficientSecuritiesMarkets ......................................................................... 129
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Chapter5 j TheValueRelevanceofAccounting Information .......................................... 153
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Chapter6 j TheMeasurementApproachtodDecisionUsefulness .................................... 194
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Chapter7 j MeasurementApplications.......................................................................... 237
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Chapter8 j TheEfficientContractingApproachtoDecisionUsefulness .......................... 285
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Chapter9 j 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:Political Issues................................................................. 527
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Pearson Canada Inc. j j

,Scott,FinancialAccountingTheory
j j j Instructor’sSolutionsManualChapter1
j j j j




CHAPTER 1 J




INTRODUCTION
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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 j




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




1.7 TheComplexityof Information in FinancialAccountingand Reporting
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1.8 TheRoleofAccountingResearch
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1.9 The Importanceof Information Asymmetry
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1.10 TheFundamentalProblem of FinancialAccountingTheory
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1.11 RegulationasaReactiontotheFundamentalProblem j j j j j j j




1.12 TheOrganizationofThisBook
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1.12.1 IdealConditions j




1.12.2 AdverseSelection j




1.12.3 MoralHazard j




1.12.4 Standard Setting j




1.12.5 TheProcessofStandardSetting j j j j




1.13 Relevance of FinancialAccountingTheoryto Accounting Practice
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, Scott,FinancialAccountingTheory
j j j Instructor’sSolutionsManualChapter1 j j j j




LEARNING OBJECTIVES AND SUGGESTED TEACHING APPROACHES
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1. TheBroad Outlineofthe 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 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- j j j j j j




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




r sucha basis of accounting to be feasible, butddo not go into much d etail
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because this topic is covered in greaterdepth in Chapter2.
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• Anintroductiontotheconceptofinformationasymmetryandresultin g
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problems of adverse selection and moral hazard. These problems
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arebasictothebookdandIfeelitisdesirableforthestudentstohave a
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―firstgo‖atthematthispoint.Iconcentrateontheintuitionunderly
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ingthetwoproblems.Forexample,adverseselectioncanbeillustrat
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edbyaskingwhowouldbefirstinlinetopurchaselifeinsuranceifth ere was
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nomedical examination, or what quality of used cars are lik ely to be
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brought to market. For moralhazard I tryto pin them down on howhard
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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 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 j j j j j j j j j




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