Instructor’s Manual financial account theory 17th edition well elaborated and updated2025

INSTRUCTOR’S SOLUTIONSMANUAL
for



FinancialAccounting
Theory
B




SeventhEdition B




WilliamR.Scott B




UniversityofWaterloo
B B




notice.
B

, Contents


Chapter 1
B Introduction .................................................................................................. 1

Chapter 2
B Accounting Under Ideal Conditions............................................................. 7
B B B




Chapter 3
B TheDecision Usefulness Approach to Financial Reporting .......................... 68
B B B B B B




Chapter 4
B Efficient Securities Markets ........................................................................ 129
B B




Chapter 5
B TheValue Relevanceof Accounting Information ......................................... 153
B B B B B




Chapter 6
B TheMeasurement Approach to Decision Usefulness .................................... 194
B B B B B




Chapter 7
B Measurement Applications ......................................................................... 237
B




Chapter 8
B TheEfficient Contracting Approach to Decision Usefulness......................... 285
B B B B B B




Chapter 9
B An Analysis of Conflict .............................................................................. 321
B B B




Chapter 10
B B Executive Compensation......................................................................... 371
B




Chapter 11
B B Earnings Management ............................................................................. 425
B




Chapter 12
B B Standard Setting:Economic Issues ........................................................... 487
B B B




Chapter13
B B Standard Setting:Political Issues .............................................................. 527
B B B




Copyright © 2015 Pearson Canada Inc.
B B B B B

,Scott, Financial Accounting Theory, 7th Edition Instructor’s Solutions Manual Chapter 1



CHAPTER 1 B




INTRODUCTION
B




1.1 TheObjectiveofThisBook
B B B B




1.2 Some Historical Perspective
B B




1.3 The2007-2008MarketMeltdowns
B B B




1.4 Efficient ContractingB




1.5 ANoteonEthicalBehaviour
B B B B




1.6 Rules-Based v. Principles-Based Accounting Standards
B B B B




1.7 TheComplexityof InformationinFinancialAccountingandReporting
B B B B B B B B




1.8 TheRoleofAccountingResearch
B B B B




1.9 TheImportanceofInformationAsymmetry
B B B B




1.10 TheFundamentalProblemofFinancialAccountingTheory
B B B B B B




1.11 RegulationasaReactiontotheFundamentalProblem
B B B B B B B




1.12 TheOrganizationofThisBook
B B B B




1.12.1 IdealConditions B




1.12.2 Adverse Selection B




1.12.3 MoralHazard B




1.12.4 StandardSetting B




1.12.5 The Processof Standard SettingB B B B




1.13 Relevanceof FinancialAccountingTheoryto AccountingPractice
B B B B B B B




1
Copyright © 2015 Pearson Canada Inc.

, Scott, Financial Accounting Theory, 7th Edition Instructor’s Solutions Manual Chapter 1


LEARNINGOBJECTIVES ANDSUGGESTEDTEACHING APPROACHES
B B B B B




1. The Broad Outline of the Book
B B B B B




IuseFigure1.1asatemplatetodescribethebroadoutlineofthebook.Sincethe students
B B B B B B B B B B B B B B B B B




typicallyhave nothadachanceto read Chapter1inthefirstcourse session, I stick fairly
B B B B B B B B B B B B B B B B B B




closely to the chapter material.
B B B B B




ThemajorpointsIdiscussare:
B B B B B




• Accounting in an ideal setting. Here, present-value-based B B B B B B




B accountingisnatural.Igoovertheidealconditionsneededforsucha B B B B B B B B B B B B




B basis of accounting tobe feasible, butdo notgo into much detail because
B B B B B B B B B B B B B




B this topic is covered in greater depth in Chapter 2.
B B B B B B B B B




• An introductiontothe conceptof information asymmetry and resulting
B B B B B B B B B




B problems of adverse selection and moral hazard. These problems are B B B B B B B B B




basic tothe book andI feelit is desirable for the
B B B B B B B B B B B B




B studentstohavea―firstgo‖atthematthispoint.Iconcentrateonthe
B B B B B B B B B B B B B B




B intuition underlying the two problems. For example, adverse selection
B B B B B B B B




can be illustrated by asking who would be firstin lineto
B B B B B B B B B B B B




B purchaselifeinsuranceiftherewasnomedicalexamination,orwhat B B B B B B B B B B




B quality of usedcarsare likelyto be broughttomarket. Formoral
B B B B B B B B B B B B




B hazardItrytopinthemdownonhowhardtheywouldworkinthis course if
B B B B B B B B B B B B B B B B




B there were no exams. B B B




• The environment in which financial accounting and reporting
B B B B B B B




B operates. Mymaingoalatthispointisthatthestudentsdonottake this B B B B B B B B B B B B B B




B environment for granted. I discuss the procedures of standard B B B B B B B B




B settingbrieflyandpointoutthatthisisreallyaprocessofregulation.
B B B B B B B B B B B B




B Inthepast,therehavebeenwell-knowncasesofderegulation,such as
B B B B B B B B B B B




airlines, trucking, financial institutions, power generation. However,
B B B B B B B




B we are entering what is likelyto be aperiod of increasing regulation,
B B B B B B B B B B B B




atleastforfinancialinstitutions.Instructors
B B B B B B




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