Faculty
Office:
Phone:
Email:
Web:
Vancouver Island University
Faculty of Management, ~~ http://www.viu.ca/management/
Department of Accounting
ACCOUNTING 421 – ACCOUNTING THEORY
Fall 2014
Professor Gordon Holyer
Building 250, Room 426
250-753-3245, local 2539 / Fax: 250-740-6551
Gordon.holyer@viu.ca
http://web.viu.ca/holyerg
Office Hours
MW 10:00 – 12:00
Prerequisite
Acct 335 and 336
Required Text
Scott, William R., Financial Accounting Theory, 7th Edition, Pearson, 2015
Reference
Canadian Institute of Chartered Accountants, CICA Handbook, Accounting, Current Edition
International Financial Reporting Standards (IFRS)
Financial Reporting in Canada (FRIC)
Method of
Instruction
This course will be taught on a lecture/discussion basis. There will be regular reading
assignments as well as assigned exercises and problems. Each student is expected to participate
in classroom discussion.
Learning Outcomes
General Learning Outcomes
 Provide students with a broad range of managerial capabilities, the capacity for critical
thinking, communication and problem solving skills, legal and ethical behavior by exploring
the various accounting theories that form the basis of Generally Accepted Accounting
Principles.
Critical Thinking And Problem Solving
 Analyze, evaluate and interpret statistical data and financial information through application
of different models to alternative measurement issues.
 The ability to select and/or develop appropriate decision making models and generate
outcome scenarios through:
o Critical assessment of accounting models and decision usefulness under ideal conditions.
o Assessment of alternative financial and economic theories on markets and decision
usefulness.
o Discussion and assessment of the economic, social and political framework of accounting
standard setting.
o Examination of the impact that economic and financial theories have on accounting and
the influence of political and social factors in financial accounting information.
o Assessment and evaluation of the economic consequences of financial information and
positive accounting theory.
 The ability to recognize and appreciate arguments and logic as flawed or sound through:
o Examination of the relevance of these theories in understanding financial accounting
procedures and reporting.
o Identification or generation of measurement perspective applications and assessment of
the decision usefulness.
Interpersonal Skills

Demonstrate the ability and disposition to employ a variety of communication skills as
deemed appropriate through class discussions and presentations.
Communication

Demonstrate proficiency in, and appreciate the importance of, grammar, spelling and syntax
through the production of the assigned essay as well as an in-class oral presentation.
Global Perspective

Critically assess the impact of global economics, political and social factors that impact the
accounting choices and theories.
Professional Integrity

Identify and evaluate behaviors to determine ethical issues and impacts in professional
practice situations by considering the following:

Knowledge of codes of ethics, standards, practices and consequences associated with
transgressions

A knowledge of, and disposition to display, social responsibility and corporate citizenship
Embracing Challenge
 To learn from debate and controversy through class discussion and written analysis.
Evaluation
Term Test
30% [October 20]
Essay/Presentation
30% [October 29]
Comprehensive Final Examination
40% [December 4 - 15]
Students must write the final exam on the date scheduled in the assigned examination room.
The term test will be scheduled at the completion of Chapter 7. The test date in this course
outline is approximate. The student is responsible for knowing the correct date.
Presentations must be made on the date scheduled.
POLICY WITH REGARD TO MISSED OR POORLY WRITTEN TESTS. If the scheduled term test is missed for any
reason a mark of zero will be assigned. If the mark obtained in the term test is less than that
received on the final, the mark received on the final will be assigned to the term test.
References
Faculty of Management (Business) requires the APA style of referencing for academic papers.
Resources for using APA are available from the VIU Writing Centre (Library, Room 474). You can
find access to online student resources (including tutorials and a printable Quick Guide) at:
http://sites.viu.ca/writingcentre/.
English Standards
Assignments must be free of spelling, punctuation and grammatical errors.
containing such errors will be penalized (i.e. mark deductions).
Accommodation
Students with documented disabilities requiring academic and/or exam accommodation should
contact Disability Services in Building 200.
Grading Scale
Grades will be assigned according to the following scale.
A+
90 – 100%
C+
64 - 67
A
85 – 89
C
60 - 63
A80 – 84
C55 - 59
B+
76 – 79
D
50 - 54
B
72 – 75
F
< 50
B68 – 71
Assignments
Last day to withdraw from this course without academic penalty is October 27, 2014.
Academic
Misconduct
Academic misconduct includes, but is not limited to, giving and receiving information during any
test or exam, using unauthorized sources of information during any test; plagiarizing; fabrication,
cheating, and, misrepresenting the work of another person as your own, facilitation of academic
misconduct, and under certain conditions, non-attendance.
Plagiarism will not be tolerated. You must reference your work and acknowledge sources with intext citations and a complete list of references. This includes direct and indirect quotes, diagrams,
charts, figures, pictures and written material.
For group projects, the responsibility for academic integrity, which can result in academic
misconduct and its resulting penalties, rests with each person in the group and sanctions would
be borne by each member.
No electronic dictionaries, cell phones or other electronic devices will be allowed in exams/
tests/quizzes. Only the following approved calculators may be used in exams/tests/quizzes. No
other materials will be allowed on the desktop apart from a pen/pencil unless specifically
approved by the faculty member.
Texas Instrument BAII Plus, BAII, BA35, Sharp EL-733A, Hewlett Packard 10B
Unit I
Historical Perspective
Information and Financial Accounting
Information Asymmetry
Fundamental Problem of Financial Accounting Theory
Accounting Under Ideal Conditions
Present Value Model Under Certainty
Present Value Model Under Uncertainty
Reserve Recognition Accounting
Historical Cost Accounting
Readings:
2.
Decision Usefulness Approach to Financial Accounting
Single Person Decision Theory
The Rational, Risk-Averse Investor
Principle of Portfolio Diversification
Reaction of Professional Accounting Bodies to the Decision Usefulness Approach
Readings:
3.
Scott, Chs. 1, 2
CICA Handbook, Sections 1000 and 1100
IAS 1 and IAS 8
Scott, Ch. 3
CICA Handbook, Sections 1000 and 1100
IAS 1 and IAS 8
Efficient Securities Markets
Capital Asset Pricing Model
Information Asymmetry
Social Significance of Properly Working Securities Markets
Full Disclosure
Readings:
Scott, Ch. 4
CICA Handbook, Section 1505
IAS 1
4.
The Value Relevance of Accounting Information
Outline of the Research Problem
Ball and Brown Study
Earnings Response Coefficients
Extraordinary Items
“Best” Accounting Policy
Readings:
5.
Measurement Perspective on Decision Usefulness
Are Securities Markets Efficient?
Value Relevance of Financial Statement Information
Ohlson’s Clean Surplus Theory
Reporting on Risk
Readings:
6.
Scott, Ch. 5
IAS 1
Scott, Ch. 6
CICA Handbook, Sections 3051, 3061, 3461
IAS 19, IAS 28, and IAS 36
Measurement Perspective Applications
Current Value Accounting
Financial Instruments
Intangibles
Reporting on Risk
Readings:
Scott, Ch. 7
TERM TEST –October 20, 2014
Unit II
1. Efficient Contracting Approach to Decision Usefulness
Contract Rigidity
Employee Stock Options
Implicit Contracts
Readings:
Scott, Ch. 8
2. Analysis of Conflict
Agency Theory
Implications of Agency Theory
Reconciliation of Efficient Securities Market Theory with Economic Consequences
Reading:
Scott, Ch. 9
3.
Applications of Conflict Between Contracting Parties
Executive Compensation
Are Incentive Contracts Necessary?
Earnings Management
Motivations for Earnings Management
The Good and Bad Sides of Earnings Management
Readings:
4.
Standard Setting: Economic Issues
Private Incentives for Information Production
Sources of Market Failure
How Much Information is Enough?
Decentralized Regulation
Readings:
5.
Scott, Chs. 10, 11
Scott, Ch. 12
Standard Setting: Political Issues
Theories of Regulation
Standard Setting in Canada, the United States and Internationally
Conflict and Compromise
Criteria for Standard Setting
International Integration of Capital Markets
Readings:
Scott, Ch. 13
COMPREHENSIVE FINAL EXAMINATION: December 4 – 15, 2014