Financial Accounting Theory
OBJECTIVES
There are three primary objectives for this course. The first objective is to introduce you to theories of accounting, past and present. The perspective provided by these theories will allow you to evaluate reporting issues and accounting alternatives. The second objective is to acquaint you with important accounting research studies relevant to the theories. Consequently, a substantial portion of our class time will be spent discussing accounting research papers. The final objective is to help you to develop your insight into issues of study design. When reading research papers we will focus on the following questions:
· What research question is being addressed?
· What are the possible explanations?
· Is the research designed so that we can distinguish between the "true" explanation and some plausible but "incorrect" reason?
TEXTBOOK AND REFERENCES
- Positive Accounting Theory, by Watts and Zimmerman, (Prentice Hall, 1986).
- Required readings (journal articles) will be available as scheduled.
- Other recommended sources include:
- ·Financial Reporting: An Accounting Revolution Third Edition, by William Beaver (Prentice Hall, 1998).
READING LIST
PHILOSOPHY OF SCIENCE
Lambert, K. and G. G. Brittan, An Introduction to the Philosophy of Science 3rd Edition (Ridgeview Publishing Company, 1987): 1-66, 113-170.
ACCOUNTING AS A REPRESENTATION OF ECONOMIC REALITY
Wolk, H. I., J. R. Francis and M. G. Tearney, Accounting Theory: A Conceptual and Institutional Approach 3rd Edition (Boston: Kent Publishing Company, 1992): 49-97.
Financial Accounting Standards Board, Statements of Financial Accounting Concepts No. 1, 2, 5, and 6, FASB, 1978, 1980, and 1984.
Dopuch, N. and S. Sunder, "FASB's Statements on Objectives and Elements of Financial Accounting: A Review," The Accounting Review, January 1980: 1-21.
Sunder, S., "Political Economy of Accounting Standards," Journal of Accounting Literature, 1988: 31-41.
Hakansson, N. H., "On the Interaction of Accounting, Economics, and Finance and Economic Consequences of Accounting," (Berkeley: Professional Accounting Program, University of California, 1979).
ACCOUNTING AND CAPITAL MARKETS
Ball, R. and P. Brown, "An Empirical Evaluation of Accounting Income Numbers," Journal of Accounting Research, Autumn 1968: 159-178.
Beaver, W. H., "The Information Content of Annual Earnings Announcements," Journal of Accounting Research, Empirical Research in Accounting Selected Studies, 1968: 67-92.
Joy, O. M. and C. P. Jones, "Should We Believe the Tests of Market Efficiency?" The Journal of Portfolio Management, 1985-86 V12 (4): 49-54.
Bernard, Victor, Jacob Thomas and James Wahlen, "Accounting-Based Stock Price Anomalies: Separating Market Inefficiencies from Risk," Contemporary Accounting Research, Summer 1997: 89-136.
Bujaki, Merridee L. and Alan J. Richardson, "A Citation Trail Review of the Uses of Firm Size in Accounting Research," Working Paper, University of Ottawa, December 1996.
Barzel, Y., "Some Fallacies in the Interpretation of Information Costs," Journal of Law and Economics, October 1977: 291-307.
Ross, S. A., "Disclosure Regulation in Financial Markets: Implications of Modern Finance Theory and Signaling Theory," Issues in Financial Regulation, ed. F. R. Edwards, (New York: McGraw-Hill, 1979): 177-216.
THE FIRM, CONTRACTING, AND ACCOUNTING
Jensen, M. C. and W. H. Meckling, "Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure," Journal of Financial Economics, January-February 1976: 305-360.
Gaver, Jennifer J., Kenneth M. Gaver and Jeffrey R. Austin, "Additional Evidence on Bonus Plans and Income Management," Journal of Accounting and Economics, February 1995: 3-28.
Beneish, Messod D. and Eric Press, "The Resolution of Technical Default," The Accounting Review, April 1995: 337-354.
Sweeney, Amy P., "Debt-Covenant Violations and Managers' Accounting Responses," Journal of Accounting and Economics, May 1994: 281-308.
Han, Jerry C. Y. and Shiing-Wu Wang, "Political Costs and Earnings Management of Oil Companies During the 1990 Persian Gulf Crisis," The Accounting Review, January 1998: 103-118.
Christie, Andrew A. and Jerold L. Zimmerman, "Efficient and Opportunistic Choices of Accounting Procedures: Corporate Control Contests," The Accounting Review, October 1994: 539-566
Mohrman, M. B., Debt contracts and FAS No. 19: A Test of the Debt Covenant Hypothesis," The Accounting Review, April 1993: 273-288.
Smith, C. W., "A Perspective on Accounting-Based Debt Covenant Violations," The Accounting Review, April 1993: 289-303.
Watts, R. L. and J. L. Zimmerman, "Positive Accounting Theory: A Ten Year Perspective," The Accounting Review, January 1990: 131-156.
Noreen, E., "The Economics of Ethics: A New Perspective on Agency Theory," Accounting, Organizations and Society, 13 (1988): 359-369.
COMING FULL CIRCLE: VALUATION WITH ACCOUNTING DATA
Bernard, Victor L., "Accounting-Based Valuation Methods, Determinates of Market-to-Book Ratios, and Implications for Financial Statement Analysis", Working Paper, University of Michigan. January 1994.
Collins, Daniel W., Edward L. Maydew, and Ira S. Weiss , "Changes in the Value-Relevance of Earnings and Book Values over the Past Forty Years", Journal of Accounting and Economics, December 1997: 39-68.
King, Raymond D. and John Christian Langli, "Accounting Diversity and Firm Valuation," Working Paper, The University of Oregon, January 1998.
Sougiannis, Theodore, "The Accounting Based Valuation of Corporate R&D," The Accounting Review, January 1994: 44-68.
Lev, Baruch, and Theodore Sougiannis, "The Capitalization, Amortization, and Value-Relevance of R&D," Journal of Accounting and Economics, February 1996: 107-138.
Amir, Eli, Michael Kirschenheiter and Kristen Willard, "The Valuation of Deferred Taxes," Contemporary Accounting Research, Winter 1997: 597-622.
Copyright © 1998 by Department of Accounting, University of Oregon.