Positive Accounting Theory: A Ten Year Perspective Author(s): Ross L. Watts and Jerold L. Zimmerman Reviewed work(s): Source: The Accounting Review‚ Vol. 65‚ No. 1 (Jan.‚ 1990)‚ pp. 131-156 Published by: American Accounting Association Stable URL: http://www.jstor.org/stable/247880 . Accessed: 31/10/2011 02:22 Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use‚ available at . http://www.jstor.org/page/info/about/policies/terms.jsp JSTOR is a not-for-profit service
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Positive Accounting Theory • Sometimes abbreviated as PAT • Explains and predicts accounting practice • Does not seek to prescribe particular actions • Grounded in economic theory • Focuses on the relationships between various individuals involved in providing resources to an organisation (agency relationship) • Owners and managers • Managers and debt providers Positive Accounting Theory • Assumptions of PAT • All individual action is driven
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Compare and contrast normative and positive accounting approaches: Definition of PAT: Watts and Zimmerman (1986) defined Pat as a theory that seeks to explain and predicts particular phenomenon. It is concerned with explaining accounting practice. The three basic hypotheses as outlined by Watts and Zimmerman (1978) underlying PAT are: 1. Bonus plan hypothesis: The bonus plan hypothesis is that managers of firms with bonus plans are more likely to use accounting methods that increase current period reported
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What is Positive Accounting Theory? Positive Accounting Theory is the branch of academic research in accounting that tries to make good predictions of real world events and translate them to accounting transactions. This contrasts with normative accounting theory‚ which that tries to recommend what should be done. Positive Theories try to explain and predicts actions such as which accounting policies firms will choose and how firms will react to newly proposed accounting standards. Positive
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QUESTION 1 a. Outline the objective and the principles of a theory that prescribes fair value accounting. Fair value accounting is to measure selected assets at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The objective of fair value accounting is linked with the objective of ‘decision usefulness’ of general purpose financial reporting. That is‚ to provide relevant information that
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3101AFE ACCOUNTING THEORY AND PRACTICE TUTORIAL 1 - Semester 2 2014 Deegan Topic 1: Introduction to financial accounting theory QUESTION 1 - Question 1.8: What is the difference between developing a theory by induction and developing a theory by deduction? As explained in this chapter‚ theory that is developed through induction is developed as a result of undertaking a series of observations of particular events‚ and on the basis of these observations‚ a theory is developed. Early
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136 Positive Accounting Theory and Science JCC Journal of CENTRUM Cathedra ™ Positive Accounting Theory and Science by M. Humayun Kabir Senior Lecturer‚ Faculty of Business Auckland University of Technology‚ Auckland‚ New Zealand Abstract This paper examines the development of positive accounting theory (PAT) and compares it with three standard accounts of science: Popper (1959)‚ Kuhn (1996)‚ and Lakatos (1970). PAT has been one of the most influential accounting research programs
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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
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approaches to accounting theory‚ 1. Deductive recur sing or “approach going from the general to the specific.” 2. Inductive approach ‘Going from the specific to the general.’ 3. The ethical approach of accounting theory places emphasis on the concept of justice‚ truth & fairness. This is particularly true of the ethical approach‚ for defining it of the separate approach does not necessarily imply that other approaches do not have ethical content‚ not does it imply that ethical theories necessarily
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Slide 1 ACCOUNTING THEORY & CONTEMORARY ISSUES (AT1) MODULE ONE Slide 2 ACCOUNTING UNDER IDEAL CONDITIONS Part 1 - Foundation items re the course Part 2 - Present value accounting under certainty Part 3 - Present value accounting under uncertainty Part 4 - Reserve recognition accounting Part 5 - Examination question examples Part 6 - Historical cost accounting Lecture by: Dr. A. L. Dartnell‚ FCGA Year 2009 - 2010 2 Slide 3 PART 1 Foundation Items re the Course Different Course
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