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

SolutionManualForFinancialAccountingTheory
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7th Edition byWilliam R. Scott, Patricia O'Brien
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Chapters 1 - 13, Complete
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, Contents


Chapter1 B Introduction .................................................................................................. 1

Chapter2 B AccountingdUnderIdealConditions............................................................. 7
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Chapter3 B TheDecisionUsefulnessApproachtoFinancialReporting ............................ 68
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Chapter4 B EfficientSecuritiesMarkets ......................................................................... 129
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Chapter5 B TheValueRelevanceofAccounting Information .......................................... 153
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Chapter6 B TheMeasurementApproachtodDecisionUsefulness .................................... 194
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Chapter7 B MeasurementApplications.......................................................................... 237
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Chapter8 B TheEfficientContractingApproachtoDecisionUsefulness .......................... 285
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Chapter9 B 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. B B

,Scott,FinancialAccountingTheory
B B B Instructor’sSolutionsManualChapter1
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CHAPTER 1 B




B 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 ContractingB




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




1.7 TheComplexityof Informationin 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
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1.12 TheOrganizationofThisBook
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1.12.1 IdealConditions B




1.12.2 AdverseSelection B




1.12.3 MoralHazard B




1.12.4 Standard Setting B




1.12.5 TheProcessofStandardSetting B B B B




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




LEARNING OBJECTIVES ANDSUGGESTED 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- B B B B B B




based accounting is natural. I go over the ideal conditions needed fo r
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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 ofadverse selection andmoral hazard. These problems are
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basictothebookdandIfeelitisdesirableforthestudentstohave a―firstgo‖
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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 cars are lik ely to be brought
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to market. For moralhazard I tryto pin them down on howhard theywould
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B work inthis course if there were no exams. B B B B B B B




• 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 forgranted. I discuss the procedures of standard setting br iefly
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and point out thatdthis is really a process of regulation. In the pa st, there
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have been well-
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known cases of deregulation, such as airlines, trucking, financial ins B B B B B B B B B




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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