Accounting theory 9

An overview of Positive Accounting Theory From Deegan, C. and Samkin, G., Financial Accounting. McGraw-Hill Irwin, New York Prepared By: Dewan Mahboob Hossain; Assistant Professor; Department of Accounting & Information Systems; University of Dhaka; Dhaka; Bangladesh.

Positive theories ,[object Object],[object Object],[object Object],[object Object]

Positive Accounting Theory (PAT) ,[object Object],[object Object],[object Object],[object Object],[object Object]

Positive Accounting Theory (PAT)…contd.. ,[object Object],[object Object],[object Object]

Positive Accounting Theory (PAT)…contd.. ,[object Object],[object Object]

Positive Accounting Theory (PAT)…contd.. ,[object Object]

Agency Relationship Principal (owner) Agent (manager) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],performance delegation

Efficiency and the opportunistic perspectives of PAT ,[object Object]

Efficiency perspective of PAT ,[object Object],[object Object]

Efficiency perspective of PAT ,[object Object],[object Object],[object Object]

Efficiency perspective of PAT ,[object Object]

Efficiency perspective of PAT (contd..) ,[object Object]

Efficiency perspective of PAT (contd..) ,[object Object],[object Object]

Opportunistic perspective of PAT ,[object Object],[object Object]

Opportunistic perspective of PAT (contd..) ,[object Object],[object Object],[object Object]

Opportunistic perspective of PAT (contd..) ,[object Object],[object Object],[object Object],[object Object],[object Object]

Owner/manager contracting ,[object Object],[object Object],[object Object]

Owner/manager contracting (contd..) ,[object Object],[object Object]

Owner/manager contracting (contd..) ,[object Object],[object Object],[object Object],[object Object]

Owner/manager contracting (contd..) ,[object Object],[object Object],[object Object],[object Object],[object Object]

Accounting based bonus plans ,[object Object],[object Object],[object Object]

Incentives to manipulate accounting numbers ,[object Object],[object Object],[object Object],[object Object],[object Object]

Incentives to manipulate accounting numbers (contd..) ,[object Object],[object Object],[object Object]

Incentives to manipulate accounting numbers (contd..) ,[object Object],[object Object],[object Object],[object Object],[object Object]

Market based bonus schemes ,[object Object],[object Object],[object Object],[object Object]

Concluding remarks ,[object Object],[object Object],[object Object]

Debt Contracting ,[object Object],[object Object],[object Object],[object Object],[object Object]

Debt contracting (contd..) ,[object Object],[object Object],[object Object]

Debt contracting (contd..) ,[object Object],[object Object]

Debt contracting (contd..) ,[object Object]

Political costs ,[object Object],[object Object]

Political costs (contd.) ,[object Object],[object Object]

Political costs (contd.) ,[object Object],[object Object],[object Object],[object Object]

Political costs (contd.) ,[object Object],[object Object],[object Object]

Accounting policy selection and disclosure ,[object Object],[object Object]

Accounting policy selection and disclosure (contd..) ,[object Object],[object Object],[object Object]

Accounting policy notes ,[object Object]

Management of Income ,[object Object],Any and all steps used to play the financial numbers game, including the aggressive choice and application of accounting principles, fraudulent financial reporting, and any steps taken towards earnings management or income smoothing. Creative accounting Intentional misstatements or omissions of amounts or disclosures in financial statements, done to deceive financial statement users, that are determined to be fraudulent by an administrative, civil or criminal proceedings. Fraudulent financial reporting A form of earnings management designed to remove peaks and valleys from the normal earning series, including steps to reduce and store profits in good years for use during the slower years. Income smoothing The active manipulation of earnings toward a predetermined target, which may be set by management, a forecast made by analysts, or an amount that is consistent with a smoother, more sustainable earnings stream. Earnings management A forceful and intentional choice and application of accounting principles done in an effort to achieve desired results, typically higher current earnings, whether the practices followed are in accordance with GAAP or not. Aggressive accounting Definition Label

Rewards of the Game ,[object Object],[object Object],[object Object],Political cost effects Increased profit-based bonuses. Bonus plan effects ,[object Object],[object Object],[object Object],[object Object],Borrowing cost effects ,[object Object],[object Object],[object Object],[object Object],[object Object],Share price effects rewards Category

Creative accounting ,[object Object],[object Object],[object Object]

Creative accounting (contd..) ,[object Object],[object Object],[object Object]

Creative accounting (contd..) ,[object Object]

Some criticisms of PAT ,[object Object],[object Object],[object Object]

Some criticisms of PAT (contd..) ,[object Object],[object Object],[object Object]

Some criticisms of PAT (contd.) ,[object Object],[object Object],[object Object]

Some criticisms of PAT (contd.) ,[object Object]

Some criticisms of PAT (contd.) ,[object Object],[object Object],[object Object],[object Object]

Some criticisms of PAT (contd.) ,[object Object],[object Object]

Concluding remarks ,[object Object],[object Object],[object Object],[object Object]

Accounting theory 9

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