SOLUTION MANUAL for Financial Accounting Theory 7th Edition ByWilliam R. Scott, Patricia O'brien All Chapters 1 to 13, Complete

SOLUTION MANUAL
Financial Accounting Theory 7th Edition
By William R. Scott, Patricia O'brien Chapters 1 -
13, Complete

, Contents


Chapterg1 Introduction ..................................................................................... 1

Chapterg2 AccountinggUndergIdealgConditions .................................................7

Chapterg3 ThegDecisiongUsefulnessgApproachgtogFinancialgReporting ............... 68

Chapterg4 EfficientgSecuritiesgMarkets...............................................................129

Chapterg5 ThegValuegRelevancegofgAccountinggInformation..............................153

Chapterg6 ThegMeasurementgApproachgtogDecisiongUsefulness .........................194

Chapterg7 MeasurementgApplications ............................................................. 237

Chapterg8 ThegEfficientgContractinggApproachgtogDecisiongUsefulness.............. 285

Chapterg9 AngAnalysisgofgConflict................................................................... 321

Chapterg10ggExecutivegCompensation................................................................ 371

Chapterg11ggEarningsgManagement ................................................................... 425

Chapterg12ggStandardgSetting:gEconomicgIssues .................................................. 487

Chapterg13ggStandardgSetting:gPoliticalgIssues..................................................... 527




gPearsongCanadagInc.

,Scott,gFinancialgAccountinggTheory Instructor’sgSolutionsgManualgChapterg1



CHAPTERg1gIN

TRODUCTION


1.1 ThegObjectivegofgThisgBook

1.2 SomegHistoricalgPerspective

1.3 Theg2007-2008gMarketgMeltdowns

1.4 EfficientgContracting

1.5 AgNotegongEthicalgBehaviour

1.6 Rules-Basedgv.gPrinciples-BasedgAccountinggStandards

1.7 ThegComplexitygofgInformationgingFinancialgAccountinggandgReporting

1.8 ThegRolegofgAccountinggResearch

1.9 ThegImportancegofgInformationgAsymmetry

1.10 ThegFundamentalgProblemgofgFinancialgAccountinggTheory

1.11 RegulationgasgagReactiongtogthegFundamentalgProblem

1.12 ThegOrganizationgofgThisgBook

1.12.1 IdealgConditions

1.12.2 AdversegSelection

1.12.3 MoralgHazard

1.12.4 StandardgSetting

1.12.5 ThegProcessgofgStandardgSetting

1.13 RelevancegofgFinancialgAccountinggTheorygtogAccountinggPractice

, Scott,gFinancialgAccountinggTheory Instructor’sgSolutionsgManualgChapterg1


LEARNINGgOBJECTIVESgANDgSUGGESTEDgTEACHINGgAPPROACHES

1. ThegBroadgOutlinegofgthegBook

IgusegFigureg1.1gasgagtemplategtogdescribegthegbroadgoutlinegofgthegbook.gSincegthegstu
dentsgtypicallyghavegnotghadgagchancegtogreadgChapterg1gingthegfirstgcoursegsession,gIgsti
ckgfairlygcloselygtogthegchaptergmaterial.

ThegmajorgpointsgIgdiscussgare:

• Accountinggingangidealgsetting.gHere,gpresent-value-
basedgaccountinggisgnatural.gIggogovergthegidealgconditionsgneededgforgs
uchgagbasisgofgaccountinggtogbegfeasible,gbutgdognotggogintogmuchgdetailg
becausegthisgtopicgisgcoveredginggreatergdepthgingChapterg2.

• Angintroductiongtogthegconceptgofginformationgasymmetrygandgresultin
ggproblemsgofgadversegselectiongandgmoralghazard.gThesegproblemsgare
g basicgtogthegbookgandgIgfeelgitgisgdesirablegforgthegstudentsgtoghavegag“fir
stggo”gatgthemgatgthisgpoint.gIgconcentrategongthegintuitiongunderlyinggt
hegtwogproblems.gForgexample,gadversegselectiongcangbegillustratedgbyg
askinggwhogwouldgbegfirstginglinegtogpurchaseglifeginsurancegifgtheregwasg
nogmedicalgexamination,gorgwhatgqualitygofgusedgcarsgareglikelygtogbegb
roughtgtogmarket.gForgmoralghazardgIgtrygtogpingthemgdowngonghowgha
rdgtheygwouldgworkgingthisgcoursegifgtheregweregnogexams.

• Thegenvironmentgingwhichgfinancialgaccountinggandgreportinggoperate
s.gMygmainggoalgatgthisgpointgisgthatgthegstudentsgdognotgtakegthisgenviro
nmentgforggranted.gIgdiscussgthegproceduresgofgstandardgsettinggbrieflyg
andgpointgoutgthatgthisgisgreallygagprocessgofgregulation.gIngthegpast,gthe
reghavegbeengwell-
knowngcasesgofgderegulation,gsuchgasgairlines,gtrucking,gfinancialginstitu
tions,gpowerggeneration.gHowever,gwegaregenteringgwhatgisglikelygtogb
egagperiodgofgincreasinggregulation,gatgleastgforgfinancialginstitutions.gIns