Positive Accounting Theory
How would critical theorists assess research based on the Positive Accounting Theory?
Accounting researchers tend to accept current accounting systems. Rather than focusing on why accounting systems favour certain classes of society, research is mainly carried out to such things as what accounting methods are most appropriate in certain circumstances, what motivates managers to use one accounting method over another and disclosure. By looking at accounting with a critical perspective is to recognise the way in which people are in control of capital. The Positive Accounting Theory (PAT) and Legitimacy Theory can be analysed critically for their bias approach of a political and economic perspective disregarding those people without wealth.
A critical perspective of accounting is a perspective that critically evaluates the role of accounting in society. It does not consider issues such as what accounting methods should be used in which situations and often views accounting as a major contributor to perceived social problems and inequalities (Deegan, 2001).
Critical theorists are those that ignore the whole world of accounting, favouring the interests of those people with wealth of power. However, they focus on the problems in and of society, not debate which methods of accounting should be employed.
Accounting to Watts & Zimmerman (1990, page 7) Positive Accounting Theory is concerned with explaining accounting practice. It is designed to explain and predict which firms will and which firms will not use a particular method… but it says nothing as to which method a firm should use. It aims to explain and predict the managers’ consequences that are based on his/her choices.
Whilst PAT is descriptive and therefore tries to describe what is happening and observe what is happening, this theory is unlike other theories, PAT is the only one that aims to explain and predict. PAT could not achieve explaining accounting practice. This is because PAT assumes that all
Accounting researchers tend to accept current accounting systems. Rather than focusing on why accounting systems favour certain classes of society, research is mainly carried out to such things as what accounting methods are most appropriate in certain circumstances, what motivates managers to use one accounting method over another and disclosure. By looking at accounting with a critical perspective is to recognise the way in which people are in control of capital. The Positive Accounting Theory (PAT) and Legitimacy Theory can be analysed critically for their bias approach of a political and economic perspective disregarding those people without wealth.
A critical perspective of accounting is a perspective that critically evaluates the role of accounting in society. It does not consider issues such as what accounting methods should be used in which situations and often views accounting as a major contributor to perceived social problems and inequalities (Deegan, 2001).
Critical theorists are those that ignore the whole world of accounting, favouring the interests of those people with wealth of power. However, they focus on the problems in and of society, not debate which methods of accounting should be employed.
Accounting to Watts & Zimmerman (1990, page 7) Positive Accounting Theory is concerned with explaining accounting practice. It is designed to explain and predict which firms will and which firms will not use a particular method… but it says nothing as to which method a firm should use. It aims to explain and predict the managers’ consequences that are based on his/her choices.
Whilst PAT is descriptive and therefore tries to describe what is happening and observe what is happening, this theory is unlike other theories, PAT is the only one that aims to explain and predict. PAT could not achieve explaining accounting practice. This is because PAT assumes that all
Bibliography: 1. Deegan, D (2000). Financial accounting theory, first edition, McGraw-Hill: Sydney 2. Watts, R. & Zimmerman, J.L. (1986). Positive Accounting Theory. Prentice-Hall: New Jersey