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Seminar 12 - Economic Consequences and Positive Accounting Theory

Financial Accounting Theory (5th Edition)

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Matt Steger Seminar #12 – Economic Consequences and Positive Accounting Theory October 1, 2009 Today’s readings covered the first portion of Scott’s Chapter 12, an article published in Accounting Horizons written by Victor H. Brown, and an letter-exchange between the Chairman of the US House of Representatives Subcommittee on Telecommunications and Finance, Committee on Energy and Commerce and a Chairman of the Securities and Exchange Commission. The commonality expressed throughout today’s readings revolved around employee stock options (ESO) and the firestorm that appeared when, in the early 1990s, FASB attempted to make changes to the accounting procedures that were used in their measurement. Scott introduce Chapter 8 by representing one of the theses of his textbook. The thesis he reminds us of states: “[M]otivation of responsible manager performance, that is, providing information to evaluate manger stewardship, is an equally important role of financial accounting as the provision of useful information to investors” (273). He then moves on to describe the importance of economic consequence and its correlation with choice in accounting policy.
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