ACCOUNTING THEORY (FAR 600)Teaching and Learning Arrangements(SEMESTER: SEPT 2013 – JAN 2014)

COURSE CODE : FAR 600PROGRAM : BACHELOR OF ACCOUNTING (HONS)CREDIT HOURS : 3CONTACT HOURS : 3STATUS : CORE

RESOURCE PERSON :

OFFICE & PHONE NO. : 012-3113857

E-MAIL : haslin33@yahoo.com

SYNOPSIS

This course is designed to further enhance the students’ understanding of the concepts and issues in accounting theory and practices. The course involves the study of the practical and theoretical issues involved in the development, implementation and changes in conceptual framework and regulatory framework.

COURSE OUTCOME

At the end of the course, students should be able to:

1. Discuss the various theories and paradigms in accounting.2. Demonstrate an understanding on the concept of Islamic Accounting, the need for it

and its differences to conventional accounting. 3. Evaluate the evolution of the conceptual framework and standard setting process,

nationally and internationally.4. Evaluate the relationship between accounting theories and framework to the practice

in the real world. 5. Analyze the recognition, measurement and other current issues in financial reporting.

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COURSE OUTLINE

Week Topic Contact Hours

Learning Levels

References

1 Historical development of accounting

Describe early history of accounting, the age of record keeping and the birth of double entry accounting

Discuss the development of accounting principles in the USA

Discuss the development of accounting theory

3 1,2 BelkaouiChapter 1(Excluding Section 1.4)

Godfrey et al.Chapter 1

2 Accounting In Islam

Describe the history of accounting in Islam Describe Islamic accounting:

o Definition

o Objective and characteristics of Islamic accounting

o Fundamental Islamic values to business activities

Discuss the need for Islamic accounting Compare the characteristics of Islamic

accounting versus conventional accounting Corporate reporting from an Islamic Perspective

3 1,2 Relevant Journal Articles(Refer References at the end of course outline)

3 - 5 Accounting Theory Construction

Pragmatic Theories

o Descriptive pragmatic approach

o Psychological pragmatic approach

Syntactic and Semantic Theories

Normative Theories

Positive Theories

9 1,2,3,4 Godfrey et al.Chapter 2Pg 20-29

Positive Theory of Accounting Policy and Disclosure

Contracting Theory Agency Theory Political Processes

1,2,3,4 Godfrey et al.Chapter 11Pg 359 – 365,

377 – 379

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Week Topic Contact Hours

Learning Levels

References

Capital Market Research

Philosophy of Positive Accounting Theory Strengths of Positive Theory

o Dissatisfaction with prescriptive standards Scope of Positive Accounting Theory

Chapter 12Pg 403 – 407

6-8 Applying Theory to Accounting Regulation

The Theories of Regulation Relevant to Accounting and Auditing

Theory of Efficient Markets Agency Theory Theories of Regulation

o Public interest theory

o Regulatory capture theory

o Private – interest theory

How Theories of Regulation Apply to Accounting and Auditing Practice

Application of Public Interest Theory Application of Capture Theory Application of Private Interest Theory Standard Setting as a Political Process

The Regulatory Framework for Financial ReportingStatutory Requirements

Corporate Governance Auditors and Oversight Independent Enforcement Bodies

The Institutional Structure for Setting Accounting and Auditing Standards

Background The IASB and FASB Convergence Program Accounting Standards for the Public Sector International Auditing Standards

Standard Setting in Malaysia

Historical development of financial reporting practice in Malaysia

Explain current financial reporting regime in Malaysia

Describe the move towards convergence with International Accounting Standards

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3

1,2,3,4,5,6

1,2

Godfrey et al.Chapter 3

Roshayani ArshadDraft Chapter, Accounting Theory: Submitted to McGraw Hill

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Week Topic Contact Hours

Learning Levels

References

Identify the challenges for standard setting

9 Normative Theories of Accounting – The Case of Conceptual Framework Projects

What is a Conceptual Framework (CF) of Accounting?

A Brief Overview of the History of the Development of CFs

The Trueblood Report The FASB Conceptual Framework Project The (UK) Corporate Report Development of CFs in Australia and Elsewhere Current Efforts of the IASB and the FASB

Building Blocks of a Conceptual Framework Definition of the Reporting Entity Users of Financial Reports Objectives of General Purpose Financial

Reporting Qualitative Characteristics of Financial Reports Balancing Relevance and Reliability Can Financial Statements Provide Neutral and

Unbiased Accounts of an Entity’s Performance and Position?

Definition of the Elements of Financial Reporting Definition of Assets Definition of Liabilities Definition of Equity Definition of Income Definition of Expenses Recognition of the Elements of Financial

Reporting Measurement Principles

Benefits Associated with Having a CF

CFs as a Means of Legitimising Standard-Setting Bodies

3 1,2,3,4 Deegan, C. Chapter 6

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Week Topic Contact Hours

Learning Levels

References

10-11 Accounting Measurement Systems

Three Main Income and Capital Measurement Systems

Historical Cost Accounting

Objective of Accounting Capital and profit Matching of Costs Theory Conservatism Arguments for Historical Cost Accounting Criticisms of Historical Cost Accounting

Current Cost Accounting

Objective of Current Cost Accounting Concept of Business Profit and Financial Capital Holding Gains and Losses Why Holding Gains are a Component of Profit

Financial Capital versus Physical Capital

In support of Physical Capital Arguments For and Against Current Cost More Specific Criticisms

Exit Price Accounting

Income and Capital Objective of Accounting Arguments For Exit Price Accounting Arguments Against Exit Price Accounting

Value in Use Versus Value in Exchange

6 1,2,3,4,5,6

Godfrey et al.Chapter 6Pg 161 - 191

12-13 Creative Accounting

Discuss the issues related to creative accounting Discuss the techniques of creative accounting Discuss the concept of ethics from the

perspectives of creative accounting

6 1,2,3,4,5,6

Mulford and ComiskeyChapter 1Pg 1 – 17

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Week Topic Contact Hours

Learning Levels

References

Earnings Management

Evidence of Earnings Management for Bonus Purposes

Other Motivations for Earnings Management

Other Contractual Motivations Political Motivations Taxation Motivations Changes of CEO Initial Public Offerings To Communicate Information to Investors

Patterns of Earnings Management

Why Does Earnings Management Persist?

The “Good” Side of Earnings Management

The “Bad” Side of Earnings Management

Scott, W.R.Chapter 11

14 Emerging Issues in Accounting and Auditing

Current Factors Influencing Accounting and Auditing Research, Regulation and Practice

XBRL The Effects of Corporate Collapses and the

Sarbanes-Oxley Act (2002)

Sustainability Accounting, Reporting and Assurance

What is Sustainability Accounting and Reporting? Recent Developments in Sustainability Reporting Trends in Sustainability Reporting Assurance Why Seek Assurance for Sustainability Reports? Sustainability Assurance Standards

Other Non-Financial Accounting and Reporting Issues

Water Accounting Water Accounting vs Green House Gas Emission

Accounting

3 1,2,3,4 Godfrey et al.Chapter 14

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COURSE ASSESSMENT/EVALUATION

Continuous Assessment: Test Group project Group Case Study

15%15%10%

Final comprehensive examination 60%Total 100%

GROUP PROJECT (Report 10%; Presentation 5%)

A comparative study on annual reports of two organizations from two distinct specialized industry sectors of the Main Market, Bursa Malaysia. The two sectors identified for this semester are Construction; and Plantation sectors. (Note: Four, with a maximum of five students, per group)

The project should include:

Business and economic literature review on the industries Study on the background of the companies Analysis of the differences and similarities of the two different industries with

regards to:- Statutory requirements- Corporate governance- Voluntary disclosure including:

Corporate social responsibility Environmental issues

Any other observations peculiar to the annual reportsReport:

Maximum of 10 pages excluding appendices Font: Arial, Size 11 Spacing: 1 ½

Presentation (Using Power Point):

The presentation should be of high standard and it will be assessed according to the following criteria (among others):

Depth of Content Quality of verbal presentation Clarity of expression of ideas Personal appearance

GROUP CASE STUDY (10 %)(Note: Two, with a maximum of three students, per group)

2,000 – 3,000 words Font: Arial, Size 11 Spacing: 1 ½

Students will be informed of the chosen case and questions for discussion, during the semester.

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REFERENCES Godfrey, J., Hodgson, A., Tarca, A., Hamilton, J. and Holmes, S. (2010). Accounting Theory, J Wiley. (7th Edition)

Scott, W.R. (2009). Financial Accounting Theory. Prentice Hall (5th

Edition).

Deegan, C. (2009). Financial Accounting Theory. McGraw-Hill Irwin (3rd Edition).

Belkaoui, Ahmed (2000), Accounting Theory, Business Press (4th Edition)

Roshayani Arshad, Draft Chapter, Accounting Theory: Submitted to McGraw Hill.

Mulford, C. W. and Comiskey E. E. (2002). The Financial Numbers Game: Detecting Creative Accounting Practices. J Wiley Sons (2nd Edition)

Other relevant readings and articles.

Journal articles for Topic 2 – Islamic Accounting:

1) Omar A. Zaid. (2004). Accounting System & recording procedures in the early Islamic States. Accounting Historian Journal.

2) Omar A. Z. (2000). Were Islamic Records Precursors to Accounting Books Based on the Italian Method? Accounting Historian Journal

3) Shahul H. (2000) Islamic Accounting – A Primer

4) Rizal Y. and Shahul H. Objectives & Characteristics of Islamic Accounting: Perceptions of Muslim Accounting Academicians in Yogyakarta Indonesia

PLAGIARISM: The Faculty regards plagiarism as a very serious matter and takes action under the appropriate disciplinary regulations against students who are involved in cases of plagiarism. Students are expected to discuss their work with peers and tutors. However, they are expected to present their own original work and make material contribution to the group work.

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