Lecture: 1 X 3 hours per week OR 2 X 2 hours per week
Lectures, seminars and case analysis. All methods of instruction apply to in class, hybrid and/or online modes of learning.
- Accounting under ideal conditions: present value model, reserve recognition accounting, historical cost accounting.
- Decision usefulness approach to financial reporting: single person decision theory, rational, risk averse investor, portfolio diversification, optimal investment decisions, portfolio risk.
- Efficient securities markets and their implications for financial reporting: informativeness of price, capital asset pricing model, information asymmetry.
- Information perspective on decision usefulness: market response, earnings response coefficients, unusual, non-recurring and extraordinary items.
- Measurement perspective on decision usefulness: theories relating to the efficiency of securities markets.
- Measurement perspective applications: traditional reporting, fair-value-oriented standards, financial instruments, accounting for intangibles, reporting on risk.
- Economic consequences: employee stock options, government assistance, successful-efforts accounting, positive accounting theory (PAT).
- Analysis of conflict: game theory (non-cooperative and cooperative), agency theory.
- Executive compensation: theory, incentives, compensation plans, role of risk, politics.
- Earnings management: motivations, patterns, “good” and “bad” side of earnings management.
- Standard setting – economic issues: private incentives for information production, sources of market failure, regulation of economic activity and decentralization regulation.
- Standard setting – political issues: public interest and interest group theories; standard setting in Canada and the U.S., International Accounting Standards Boards (IASB), conflict and compromise, criteria for standard setting.
At the end of the course, the successful student should be able to:
- describe various theories that underlie financial accounting and reporting;
- explain the impact of accounting policies on financial accounting and reporting;
- explain the impact of financial accounting and reporting on securities markets;
- explain game and agency theories and their implications for accounting;
- explain the criteria, and the economic and political issues involved in the standard setting process;
- demonstrate awareness of ethical and professional standards and responsibilities of financial management professionals.
Evaluation will be carried out in accordance with the Douglas College Evaluation Policy.
| Assignments/projects/tests AND case analysis | 30% |
| Midterm examination | 35% |
| Final examination | 35% |
| Total | 100% |
Students must write both the midterm examinations and the final examinations to pass the course.
Students may conduct research as part of their coursework in this class. Instructors for the course are responsible for ensuring that student research projects comply with College policies on ethical conduct for research involving humans, which can require obtaining Informed Consent from participants and getting the approval of the Douglas College Research Ethics Board prior to conducting the research.
Textbooks and Materials to be Purchased by Students
Required: William R. Scott. Financial Accounting Theory, latest Canadian edition. Prentice-Hall, Toronto, or other textbooks as approved by department.
Optional (at discretion of instructor): Schroeder, Clark and Cathey, Financial Accounting Theory and Analysis: text readings and cases, latest edition. John Wiley & Sons Inc.
Instructor compiled materials (if applicable)
Only Faculty of Commerce and Business approved calculators may be used in examinations.