Chapter 1

Chapter 1 - Scott (2009), Accounting Theory CHAPTER 1 1....

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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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