Unformatted text preview: Scott (2009), Accounting Theory CHAPTER 1 1. The Broad Outline of the Book I use Figure 1.1 as a template to describe the broad outline of the book and course. Since the students typically have not had a chance to read Chapter 1 in the first course session, I stick fairly closely to the chapter material. The major points I discuss are: • Accounting in an ideal setting. Here, present-value-based accounting is natural. I go over the ideal conditions needed for such a basis of accounting to be feasible, but do not go into much detail because this topic is covered in greater depth in Chapter 2. • An introduction to the concept of information asymmetry and resulting problems of adverse selection and moral hazard. These problems are basic to the book and I feel it is desirable for the students to have a “first go” at them at this point. I concentrate on the intuition underlying the two problems. For example, I illustrate adverse selection by asking them who would be first in line to purchase life insurance if there was no medical examination, or...
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This note was uploaded on 03/17/2011 for the course ECON 691 taught by Professor Chan during the Spring '11 term at BU.
- Spring '11