Financial Accounting Theory 8E Scott & O’Brien ©2020  Solution Manual  

SOLUTION MANUAL for Financial Accounting Theory, 8E Scott & O’Brien ©2020   Solution Manual  


Financial Accounting Theory 8E Scott OBrien ©2020 Test Bank and Solution Manual 770x1024 1

Financial Accounting Theory 8E Scott OBrien ©2020   Solution Manual 


  • Hardcover: 656 pages
  • Publisher: Pearson; 8 edition (April 14, 2019)
  • Language: English
  • ISBN-10: 013416668X
  • ISBN-13: 978-0134166681

Copyright: 2021

Financial Accounting Theory  8E Scott & O’Brien ©2020  




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Financial Accounting Theory continues to orient the coverage of accounting standards to those of the International Accounting Standards Board (IASB). As in previous editions, some coverage of major U.S. accounting standards is also included. While the text discussion concentrates on relating standards to the theoretical framework of the book, the coverage provides students with exposure to the main features of the standards themselves.

Despite its theoretical orientation, the book does not ignore the institutional structure of financial accounting and standard-setting. It features considerable coverage and critical evaluation of financial accounting standards and regulations, such as fair value accounting, financial instruments, reserve recognition accounting, management discussion and analysis, employee stock options, impairment tests, hedge accounting, derecognition, consolidation, and comprehensive income. The structure of standard-setting bodies is also described, and the role of structure in helping to engineer the consent necessary for a successful standard is evaluated

Table of Contents

Chapter 1: Introduction
Chapter 2: Accounting Under Ideal Conditions
Chapter 3: The Decision Usefulness Approach to Financial Reporting
Chapter 4: Efficient Securities Markets
Chapter 5: The Value Relevance of Accounting Information
Chapter 6: The Valuation Approach to Decision Usefulness
Chapter 7: Valuation Applications
Chapter 8: The Efficient Contracting Approach to Decision Usefulness
Chapter 9: An Analysis of Conflict
Chapter 10: Executive Compensation
Chapter 11: Earnings Management
Chapter 12: Standard Setting: Economic Issues
Chapter 13: Standard Setting: Political Issues

New To This Edition

Below is a comprehensive list of major changes made to the eighth edition of Financial Accounting Theory:

  • The text reviews recent academic accounting research, with updated explanations and discussion of important papers added throughout the text. The text represents the current state of accounting-related theories, as published in major research journals up to about mid-2018.
  • We have revised all chapters to improve the understandability of the exposition, discarding some redundant material, and further clarifying the discussion of numerous topics.
  • The coverage of the Conceptual Framework (Chapter 3) has been updated to the 2018 IASB version, with references to it incorporated throughout the text. We have also updated references to new accounting standards (Chapter 7), several of which were at the exposure draft stage in Edition 7.
  • We have added numerous real-world examples to illustrate the theory. These are mostly Theory in Practice vignettes with some related problem material. Items included are Toshiba Corp. (Chapter 1), Home Capital Group (Chapters 3, 4, 6), Vulture funds (Chapter 3), SEC EDGAR (Chapter 4), Inco. Ltd. (Chapter 7), Broadwind Energy Inc. (Chapter 7), Health South Corp. (Chapter 10), Barrick Gold Corp. (Chapter 10), Valeant Pharmaceuticals (Chapter 11).
  • Theory in Practice vignette 3.2, regarding evidence that tone of MD&A predicts future earnings, is rewritten to bring out artificial intelligence implications. Additional examples of computerized textual analysis are added, including of analyst written reports (Chapter 5), effects of tone and sentiment on attribute framing (Chapter 6). and qualitative statements in earnings announcements (Chapter 12).
  • We have updated problem material, changed numerical solutions, and added new problems.
  • The discussion and illustration of Reserve Recognition Accounting (Chapter 2), Management Discussion and Analysis (Chapter 3), and RBC compensation plan (Chapter 10) are updated.

Users of previous editions should take note that we have updated some terminology, adopting wording that we believe will be more easily understood.  The most important is the change from “measurement approach” to “valuation approach,” when referring to the standard-setting approach that emphasizes current values (Chapter 7). In addition, we previously used the term “clean surplus” to describe both Ohlson’s (1995) theoretical model and various valuation techniques that derive from it (Chapter 6).  In this edition, we use “residual income” for the valuation techniques.  We have also replaced the term “late timing” with “backdating” in relation to employee stock options (Chapter 8).



The 2018 IASB Conceptual Framework is an important component of this book. Over time, it will be an important aspect of the financial accounting environment. Its relationships to the theory developed here are critically evaluated. While we retain extensive discussion of alternate theories of investor behaviour, this book continues to regard the theory of rational investors as important to helping accountants prepare useful financial statement information.


Theory in Practice: These vignettes provide real-world cases that illustrate the theoretical concepts.  Some are pursued further in end-of-chapter Questions and Problems. 

Examples: Numerical examples with detailed commentary about the method of solution make the theory more concrete, reinforcing students’ learning. 

Figures: Each chapter begins with a schematic figure.  The figure at the start of Chapter 1 shows the design of the book, and each subsequent chapter starts with a figure showing the design of that chapter.

Questions and Problems: Each chapter except Chapter 1 ends with questions and problems that allow students to test, and sometime extend, their understanding of the chapter’s contents.  


About the Author

William Scott received his B. Comm. from Carleton University, and his MBA and Ph.D. from the School of Business, University of Chicago. He is a Fellow of Chartered Professional Accountants Canada. His research has been published in the Journal of Accounting Research, Contemporary Accounting Research, Journal of Business Finance & Accounting, and several other academic journals. He has served on the editorial boards of Journal of Accounting Research, Contemporary Accounting Research, and The Accounting Review; and served a term as Editor of Contemporary Accounting Research. He has taught at Carleton University, University of Chicago, Queen’s University at Kingston, University of British Columbia and University of Waterloo, and is now distinguished Emeritus Professor at University of Waterloo.

Professor Patricia C. O’Brien is the EY Professor at the School of Accounting & Finance, University of Waterloo. Her research, on topics concerning financial analysts, financial reporting standards, and information in capital markets, is published in many of the premier accounting journals.  In 2009, the Canadian Academic Accounting Association honored Professor O’Brien with the Haim Falk Award for Distinguished Contribution to Accounting Thought.  She currently serves on the Academic Advisory Council to Canada’s Accounting Standards Board.  She has served as Editor-in-Chief of Contemporary Accounting Research (CAR), and on the editorial boards of CAR, the Journal of Accounting ResearchThe Accounting Review, and the Journal of Accounting and Public Policy.  She holds an A.B. degree cum laude in mathematics from Cornell University, and earned her M.B.A. and Ph.D. degrees at the University of Chicago.  Prior to joining Waterloo, Professor O’Brien was a faculty member at the University of Rochester, Massachusetts Institute of Technology, the University of Michigan, London Business School, and York University.  She has held visiting appointments at the Helsinki School of Economics, the University of Chicago, Stanford University, and the University of Amsterdam, as well as in the Office of the Chief Economist of the Ontario Securities Commission.


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What is SM, TB , IM ?

· What is the Test Bank (TB)?

An ever-expanding collection of previously administered exams, quizzes, and other assessment measures in a wide range of courses made available for current students as study aids.

Why should I use previously administered tests to study?

* become familiar with how material will be tested

* see the format of the test

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A Solutions Manual contains all the answers to the questions in the book with detailed explanations and examples.



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