Lecture10_Policy_Blackboard

Lecture10_Policy_Blackboard - Accounting Policy in a...

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Accounting Policy in a Historical, Institutional and International Context Session Objectives Examine the capital formation process. Understand the function of capital markets and the role of accounting. Appreciate how accounting standards are established in the U.S. and at the international level.
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Capital Formation Process Consumers Supply of physical capital Business enterprises Supply of money capital Saving Investment
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Consumer-savers Business enterprises Direct Purchase Financial Intermediaries invest (indirect purchase) purchase Banks Underwriters Savings and Loan Associations Brokerage Firms Insurance Companies Capital Markets
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Information Acts Securities Act of 1933 (Disclosure Act) Securities and Exchange Act of 1934 (SEC) Financial Accounting Standards Board (FASB)
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Expected returns = f(information)
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Value of = f(expected returns) = F(accounting a security information)
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If information is “crummy” Actual returns > < expected returns risk PV proceeds to firm capital investment production society’s material welfare
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Valuation Models PV Cash flow Conventional (HC) GPL RC MV
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Choice Criteria Objectivity Feasibility Decision relevance
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Congress SEC FASB Firms Accountants Users FEI AICPA AAA IMA AIMR
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Lecture10_Policy_Blackboard - Accounting Policy in a...

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