Solution Manual for Financial Accounting Theory, 8th Edition by William R. Scott and Patricia O'Brien isbn-9780134166681 Complete Latest Verified Guide

Contents

,Chapter 1 Introduction .................................................................................................. 1
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Chapter 2 Accounting Under Ideal Conditions .................................................... 7
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Chapter 3 The Decision Usefulness Approach to Financial Reporting ........ 68
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Chapter 4 Efficient Securities Markets .................................................................. 129
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Chapter 5 The Value Relevance of Accounting Information ......................... 153
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Chapter 6 The Measurement Approach to Decision Usefulness .................... 194
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Chapter 7 Measurement Applications ...................................................................... 237
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Chapter 8 The Efficient Contracting Approach to Decision Usefulness ...... 285
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Chapter 9 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
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Pearson p o Canada p o Inc.

,Scott, Financial
po Instructor’s Solutions Manual
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Accounting Chapter


CHAPTER 1 po




po INTRODUCTIO

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1.1 The Objective of This Book
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1.2 Some p o Historical p o Perspective

1.3 The 2007-2008 Market Meltdowns
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1.4 Efficient Contracting
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1.5 A Note on Ethical Behaviour
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1.6 Rules-Based p o v. po po Principles-Based p o Accounting p o Standards

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
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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 po




1.12.2 Adverse p o Selection

1.12.3 Moral Hazard p o




1.12.4 Standard p o Setting

1.12.5 The p o Process p o of p o Standard p o Setting

1.13 Relevance p o of p o Financial Accounting Theory to Accounting
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, Scott, Financial
po Instructor’s Solutions Manual po po


Accounting Chapter

LEARNING P O OBJECTIVES P O AND SUGGESTED TEACHINGP O PO P O APPROACHES


1. The p o Broad p o Outline p o of the po p o Book

I use Figure 1.1 as a template to describe the broad outline
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p o of the book. Since the students typically have not had a chance to
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po read Chapter 1 in the first course session, I stick fairly closely to
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p o 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
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po accounting is natural. I go over the ideal conditions needed
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po for such a basis of accounting to be feasible, but
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p o do not go into much detail because this topic is
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p o covered in greater depth in Chapter 2.p o p o p o p o po p o




• An introduction to the concept of information asymmetry and
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p o resulting problems of adverse selection and moral
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p o hazard. These problems are basic to the book and I
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p o feel it is desirable for the students to have a ―first go‖ at
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po them at this point. I concentrate on the intuition underlying
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po the two problems. For example, adverse selection can be
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po illustrated by asking who would be first in line to
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p o purchase life insurance if there was no medical p o p o p o p o p o p o p o




p o examination, or what quality of used cars are likely p o p o p o p o p o p o p o p o




po to be brought to market. For moral hazard I try to pin
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po them
down on how hard they would work in this course if there
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p o were no exams. po po




• The environment in which financial accounting and reporting
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p o operates. My main goal at this point is that the students do
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po not take this environment for granted. I discuss the
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p o procedures of standard setting briefly and point out p o po p o p o p o p o p o




p o that this is really a process of regulation. In the
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p o past, there have been well-known cases of deregulation,
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