Faculty of Business: Accounting
Credit points: 6 cp

Subject level: Undergraduate

Result Type: Grade and marks

Requisite(s): 22320 Accounting for Business Combinations AND 22420 Accounting Standards and Regulations
These requisites may not apply to students in certain courses.
There are also course requisites for this subject. See access conditions.

Handbook description

This is a capstone subject involving the accounting theory which underpins the information content and disclosure requirements of contemporary corporate reporting. Topics covered include the evolution of accounting thought and language; the development of accounting principles and structure; the nature and role of theory; theory construction and verification in accounting; positive accounting theory and methodology; and accounting information and securities markets.

Subject objectives/outcomes

On successful completion of this subject students should be able to:

1. Identify and classify the types of theories and their properties.
2. Understand and discuss the nature of the normative approach to theory.
3. Explain the embedded assumptions behind and the reasons for the dominance of the Historical Cost model.
4. Understand and critically analyse Positive Accounting developments.

Contribution to graduate profile

This subject contributes to the integrating themes of the Bachelor of Business program by presenting to students the theoretical issues that arise in the many facets of the financial accounting stream of the course. Here the issues are considered in a holistic manner with the presentation of frameworks that have been argued from the past and currently, and which issues go to the very nature of accounting as an essential instrument assisting the business community. Information and disclosure requirements that protect market stakeholders are examined in the light of the arguments and tests of their usefulness and effectiveness. The contribution of Positive Theory to the ideas and pragmatic solutions proposed by accounting is critically evaluated. The status of standards is examined within a context of comprehensive theoretical proposals. As part of the examination of issues at each stage, the ethical implications at the individual, corporate and societal levels are considered and reflected upon using the knowledge and skills of appropriate ethical theories, principles and rules.

Teaching and learning strategies

The lectures will incorporate a range of teaching strategies. They will include direct interaction through student participation in class discussions, debates, case studies as well as through weekly small group work on the preparation and later presentation of diverse theoretical and practical issues to a large number of students in a lecture session.

Content

• Theory and method.
• Theory of accounting in an historical context of time and place.
• Measurement theory.
• Financial accounting's reporting perspectives.
• Cost attach theory.
• Normative theory (Current Purchasing Power, Current Cost and Exit Price).
• Positive theory and Capital Markets research.
• Accounting policy choice research.
• Behavioral accounting research.
• Political environment of standard setting and the Australian situation.
• Ethics of standard setting.

Assessment

Topic Presentation (Group)	10%
This addresses objectives 1, 2, 3 and 4.
Mid-semester formal in-class examination – essay questions (Individual)	30%
This addresses objectives 1, 2, 3 and 4.
Final formal in-class examination – essay questions (Individual)	60%
This addresses objectives 1, 2, 3 and 4.

Students must achieve a satisfactory standard in all the above components of the subject assessment. In particular, students must receive at least 40% (24/60) in the Final Examination to pass this subject.

Examinations will be conducted under University examination conditions, and hence thoroughly address concerns regarding secure assessment. Topic presentations will be secured by assessment on in-class performance and the incorporation of a viva voce.

Recommended text(s)

Godfrey, J., Hodgson, A. and Holmes, S. (2003), Accounting Theory, 5th ed, Wiley, Milton.

Indicative references

Abdolmohammadi, A and McQuade, R. (2002), Applied Research in Financial Reporting, Prentice-Hall, Englewood Cliffs.

Christensen, J. and Demski, J. (2003), Accounting Theory, Prentice-Hall, Englewood Cliffs.

Evans, T. (2003), Accounting Theory: Contemporary Accounting Issues, South-Western, Cincinnati.

Henderson, S., Peirson, G. and Harris, (2003), Financial Accounting Theory, 3rd ed, Pearson Education Australia, Sydney.

Watts, Ross L. and Zimmerman, Jerold L. (1986), Positive Accounting Theory, Prentice-Hall, Englewood Cliffs.

Abdolmohammadi, A and McQuade, R. (2002), Applied Research in Financial Reporting, Prentice-Hall, Englewood Cliffs.

Christensen, J. and Demski, J. (2003), Accounting Theory, Prentice-Hall, Englewood Cliffs.

Evans, T. (2003), Accounting Theory: Contemporary Accounting Issues, South-Western, Cincinnati.

Henderson, S., Peirson, G. and Harris, (2003), Financial Accounting Theory, 3rd ed, Pearson Education Australia, Sydney.

Watts, Ross L. and Zimmerman, Jerold L. (1986), Positive Accounting Theory, Prentice-Hall, Englewood Cliffs.