day%202%20objective%20of%20accounting%202010%20fall%20v2

day%202%20objective%20of%20accounting%202010%20fall%20v2 -...

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Click to edit Master subtitle style ACCY 301 Measurement and Disclosure Objectives of Accounting
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Today’s Agenda n Why accounting information? n Information asymmetry  n Investment and valuation n Contracting and stewardship n Discussion: Demand and supply of  accounting information n Qualitative characteristics of useful  information n Relevance n Faithful representation n
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Review of Last Session n Why accounting?
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Who Are Users of Accounting  Information? n Current shareholders n Potential shareholders n Lenders n Board of directors n Customers n Suppliers n Employees n Government regulators
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Main Uses of Accounting  Information n On financial markets: Make investment  decisions n Inside organizations: Make contracts  more efficient
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Financial Market Use of  Accounting Information
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Stock Market Reaction to Earnings  (Bernard and Thomas 1987)
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Stock Market Reaction to Earnings  Surprises (Skinner and Sloan 2002)
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Insider Trading Based on Beat  or Miss Earnings Targets n In the Galleon case (WSJ. OCTOBER 21, 2009.  “Search for an Investing Edge Went Too Far, Say  Prosecutors”) n In July 2008, the criminal complaint alleges, an unnamed  executive at Akamai Technologies told Ms. Chiesi that  Akamai would project lower-than-expected earnings. n She shared the information with Mr. Rajaratnam, and New  Castle also bet against the stock, the complaint says. The  company announced that it expected upcoming earnings per  share below analysts' expectations, and the shares then  traded lower.
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Insider Trading Based on Beat  or Miss Earnings Targets n In the Galleon case (WSJ. OCTOBER 22, 2009.  “Search for an Investing Edge Went Too Far, Say  Prosecutors”) n The informant sought to rejoin Mr. Rajaratnam in late 2005  when facing financial difficulties, the SEC complaint said. Mr.  Rajaratnam asked if the applicant had inside information  about any public companies, the complaint alleged. 
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