Solution Manual For Financial Accounting Theory 7th Edition by William R. Scott, Patricia O'Brien All Chapters 1 to 13 complete Verified editon ISBN: 9780273773436

Solution ManualForFinancialAccountingTheory7th
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c EditionbyWilliamR.Scott,PatriciaO'BrienChapters
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c 1-13,Complete
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, Contents


Chapter 1 c Introduction.................................................................................................. 1

Chapter 2 c Accounting Under Ideal Conditions ............................................................ 7
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Chapter 3 c The Decision Usefulness Approach to Financial Reporting .......................... 68
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Chapter 4 c Efficient Securities Markets ........................................................................129
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Chapter 5 c The Value Relevance of Accounting Information .........................................153
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Chapter 6 c The Measurement Approach to Decision Usefulness ....................................194
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Chapter 7 c Measurement Applications .........................................................................237
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Chapter 8 c The Efficient Contracting Approach to Decision Usefulness ........................ 285
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Chapter 9 c 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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Pearson Canada Inc.
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,Scott, Financial AccountingTheory
c c c Instructor’s Solutions Manual Chapter 1
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CHAPTER 1 c




INTRODUCTION
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1.1 The Objective of ThisBook
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1.2 SomeHistoricalPerspective
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1.3 The 2007-2008 MarketMeltdowns
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1.4 EfficientContracting c




1.5 A Noteon Ethical Behaviour
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1.6 Rules-Basedv. Principles-BasedAccountingStandards c c c c




1.7 The Complexityof Information in FinancialAccountingand 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 FundamentalProblem of FinancialAccountingTheory
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1.11 Regulation asa Reaction to the FundamentalProblem
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1.12 The Organization ofThis Book
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1.12.1 IdealConditions c




1.12.2 Adverse Selection c




1.12.3 MoralHazard c




1.12.4 StandardSetting c




1.12.5 The Process of Standard Setting
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1.13 Relevance of FinancialAccountingTheoryto Accounting Practice
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, Scott, Financial AccountingTheory
c c c Instructor’s Solutions Manual Chapter 1 c c c c




LEARNING OBJECTIVESANDSUGGESTEDTEACHING APPROACHES
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1. The Broad Outline ofthe 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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cstudents typically have not had a chance to read Chapter 1 in the first coursesession, I
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cstick 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 is c c c c c c c c




c natural. I go over the ideal conditions needed for sucha basis of c c c c c c c c c c c c




c accounting to be feasible, but do not go into much detail because this c c c c c c c c c c c c




c topic is covered in greaterdepth in Chapter2.
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• An introduction to the concept of information asymmetry and resulting
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c problems of adverse selection and moral hazard. These problems are c c c c c c c c c




c basic to the book and I feel it is desirable for the students to have a “first
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c go” at them at this point. I concentrate on the intuition underlying the two
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c problems. For example, adverse selection can be illustrated by asking c c c c c c c c c




c who would be first in line to purchase life insurance if there was no
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c medical examination, or what quality of used cars are likely to be brought
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c to market. For moralhazard I tryto pin them down on howhard theywould
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c work inthis course if there were no exams.
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• The environment in which financial accounting and reporting operates.
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c My main goal at this point is that the students do not takethis
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c environment for granted. I discuss the procedures of standard setting c c c c c c c c c




c briefly and point out that this is really a process of regulation. In the past,
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c there have been well-known cases of deregulation, such as airlines,
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c trucking, financial institutions, powergeneration. However, we are c c c c c c c




c entering what is likely to be a period of increasingregulation, atleastfor c c c c c c c c c c c c c




financial institutions. Instructors
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