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Financial Accounting Theory

507434 - Financial Accounting Theory
Faculty

Faculty of Business

Department

International Accounting and Finance

Credit Hours

3

Pre-requisite

507231

Co-requisite

-

Distribution

3+0
This course provides theoretical and conceptual foundation of accounting by illustrating the nature of normative and positive accounting theories; for the normative theories, this course discusses theoretical and empirical evidence of the usefulness of alternative accounting methods employing the conceptual framework case and the case of accounting for changing prices. It illustrates different types of normative accounting theories such as true income theories and decision usefulness theories. In addition, it discusses the nature and usefulness of financial statements. For the positive accounting theories, it discusses the bonus hypothesis and debt covenant hypothesis to explain earnings management and illustrates theoretical and empirical evidence to explain earnings management. Besides, this course introduces the capital markets based research in accounting (CMBRA) and its role in accounting theorization. In addition, this course discusses some methodological notions such as deductive vs. inductive reasoning in accounting research.