10/16/10
Background Information
C.R. Vanguard Supermarket (Gongbei):
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Ownership:
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The Branch of China Resources Vanguard Flagship operating supermarket chains of C.R.
v
v
Products
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Daily merchandises, Food, & Electric appliances, etc
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Target Customers
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However, we canalso think about earnings management from an efﬁcient
contracting perspective. When setting compensation contracts, ﬁrms will antici—
pate managers’ incentives to manage earnings and will allow for this in the
amount of
Accounting Theory
CHAPTER 2
Empirical Research: Implications for Financial Statement Analysis
3 major approaches to accounting theory and research:
1.
Classical Approach
prior to the mid-1960s
develop a most correct accounting representation of some tru
Consider, as possible estimates of a and B, the numbers a and b. so that the est '1-
mated line is
f.
y = a + bx
is, we need some measure of the distance of
To determine how good an estimate this
12.6 shows, for a single point. how this dis-
the points (n
Accounting Theory
CHAPTER 1
The Development of Accounting Theory
1.1
The Nature of an Accounting Theory
A theory is defined as a set of interrelated constructs (concepts), definitions, and propositions
that present a systematic view of phenomena by specif
THE NATURE OF AN ACCOUNTING THEORY
Theory can be described simply as the logical reasoning
underlying the statement of a belief.
The primary objective of accounting theory is to provide a
basis for the prediction and explanation of accounting
behavior and
DEDUCTIVE APPROACH (by nature normative)
If we assume at this point that the basic propositions about the
accounting environment consist of both objectives ad postulates,
the steps used to derive the deductive approach will include:
Specifying the objecti
The deductive approach to the construction of any theory
begins with basic propositions and proceeds to derive
logical conclusions about the subject under consideration. A
simple example of a deductive system theory would be
Premise 1: A horse has four le
What weve learnt today?
You made
1) a clear statement of the problem (what is the object
inside the box?),
2) hypotheses (possible inner configurations that would
explain your perceptions),
3) predictions and experimental testings (tilting, while
listenin
-' - -' ' Empirical research in accounting
(abnormal) returns. As such. the tests are joint tests of the EMH, estimates of informa
expectations. and the modelling of normal (and. therefore. abnormal) returns. '
Market model