Economic Consequences and Positive Accounting Theory参考.ppt

Homework #6 Identify theoretical terms learned in today’s class Identify theoretical issues learned in today’s class Case analysis: General Electric (Appendix 2 of “Homework Assignment”) Create a list of strategies identified in the case that GE may have used to manage earnings. For each strategy, discuss whether it’s real earnings management or accrual-based earnings management Discuss whether GE benefited from these earnings management strategies, based on information provided in the case. Discuss why earnings management was possible at GE, based on information provided in the case. * * * * * * * * * * * * * * * Chapter 8 Economic Consequences and Positive Accounting Theory * Chapter 8 Overview What is Positive Accounting Theory (PAT)? Theoretical origin of PAT PAT assumptions and hypotheses Pros and Cons of PAT Two versions of PAT Opportunistic and Efficiency views * Positive Accounting Theory (PAT) Broad definition A theory that is in contrast to normative accounting theory Normative: what should be Positive: what actually is Narrow definition A theory to explain and predict managers’ accounting choices/decisions Involves studies that examines the “determinants and consequences” of accounting choice (decision) (Fields et al. 2001) Competing with EMH/IA, EMH/MA * Positive Accounting Research Broad scope “the branch of academic research in accounting that seeks to explain and predict actual accounting practices” (Wiki) Also called “empirical accounting research” Include EMH-based studies Narrow scope Studies “that examines the determinants and consequences of accounting choice” (Fields et al. 2001) Competing with EMH-based studies * Theoretical Origin of PAT Positive economics - Friedman (1953) Arguments on whether accounting choice matters (recall EMH/IA) Arguments on fair value vs. conservatism (recall MA/FVA) Agency theory Contracting Theory * 1. Positive Economics Positive economic theory Is the branch of economics that concerns the description