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
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7th Edition by William R. Scott, Patricia O'Brien
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f Chapters 1 - 13, Complete
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, Contents


Chapter 1 f Introduction.................................................................................................. 1

Chapter 2 f Accounting Under Ideal Conditions ........................................................... 7
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Chapter 3 f The Decision Usefulness Approach to Financial Reporting ....................... 68
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Chapter 4 f Efficient Securities Markets .......................................................................129
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Chapter 5 f The Value Relevance of Accounting Information ......................................153
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Chapter 6 f The Measurement Approach to Decision Usefulness .................................194
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Chapter 7 f Measurement Applications ........................................................................237
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Chapter 8 f The Efficient Contracting Approach to Decision Usefulness ..................... 285
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Chapter 9 f An Analysis of Conflict ........................................................................... 321
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Chapter 10 Executive Compensation ......................................................................... 371
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Chapter 11 Earnings Management ............................................................................. 425
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Chapter 12 Standard Setting: Economic Issues .......................................................... 487
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Chapter 13 Standard Setting: Political Issues ............................................................. 527
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f Pearson fCanada fInc.

,Scott, Financial Accounting Theory
f f f Instructor’s Solutions Manual Chapter 1
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CHAPTER 1 f




f INTRODUCTIO

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1.1 The Objective of This Book
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1.2 Some Historical Perspective
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1.3 The 2007-2008 Market Meltdowns
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1.4 Efficient Contracting f




1.5 A Note on Ethical Behaviour
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1.6 Rules-Based v. Principles-Based Accounting Standards f f f f




1.7 The Complexity of Information in Financial Accounting and Reporting
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1.8 The Role of Accounting Research
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1.9 The Importance of Information Asymmetry
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1.10 The Fundamental Problem of Financial Accounting Theory
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1.11 Regulation as a Reaction to the Fundamental Problem
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1.12 The Organization of This Book
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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
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1.13 Relevance of Financial Accounting Theory to Accounting Practice
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, Scott, Financial Accounting Theory
f f f Instructor’s Solutions Manual Chapter 1 f f f f




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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f students typically have not had a chance to read Chapter 1 in the first
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f coursesession, 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 f f f f f f f




f is natural. I go over the ideal conditions needed for sucha basis of
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f accounting to be feasible, but do not go into much detail because this f f f f f f f f f f f f




f 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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f problems of adverse selection and moral hazard. These problems f f f f f f f f




f are basic to the book and I feel it is desirable for the students to have
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f a ―first go‖ at them at this point. I concentrate on the intuition
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f underlying the two problems. For example, adverse selection can be f f f f f f f f f




f illustrated by asking who would be first in line to purchase life f f f f f f f f f f f




f insurance if there was no medical examination, or what quality of f f f f f f f f f f




f used cars are likely to be brought to market. For moral hazard I try to
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pin them down on how hard they would work inthis course if there
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f were no exams. f f




• The environment in which financial accounting and reporting
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f operates. My main goal at this point is that the students do not f f f f f f f f f f f f




f takethis environment for granted. I discuss the procedures of
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f standard setting briefly and point out that this is really a process of
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f regulation. In the past, there have been well-known cases of f f f f f f f f f




f deregulation, such as airlines, trucking, financial institutions, f f f f f f




f powergeneration. However, we are entering what is likely to be a
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f period of increasing regulation, at least for financial institutions.
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