财务会计理论(司可脱)ppt文件08_scott_im_ch08

2006 Pearson Education Canada Inc.,8-1,Chapter 8Economic Consequences and Positive Accounting Theory, 2006 Pearson Education Canada Inc.,8-2,Economic Consequences, a Simple Definition,Accounting Policies Matter (Especially to Managers), 2006 Pearson Education Canada Inc.,8-3,Recall From Efficient Securities Market Theory,Beaver (1973) Argued That Accounting Policy Choices Do Not Affect Firms Security Prices, if No Cash Flow Effects and if Chosen Policies are Fully DisclosedThis Argument Implies That Accounting Policies Do Not Matter, 2006 Pearson Education Canada Inc.,8-4,Another Efficient Securities Market Anomaly?,Answer: NoEconomic Consequences Can Be Reconciled With Efficient Securities Market TheoryBut First, We Illustrate Existence of Economic Consequences, 2006 Pearson Education Canada Inc.,8-5,Employee Stock Options,APB 25 (1972)ESOs usually issued with zero intrinsic value, so that no expense recordedFASB Exposure Draft (1993) Fair value of ESOs to be expensedFair value based on an option pricing formula, such as Black/ScholesFair value amortized over vesting period, 2006 Pearson Education Canada Inc.,8-6,Employee Stock Options, Contd,Managements Negative Reaction to 1993 FASB Exposure Draft, Despite No Direct Effect on CashflowsLower share prices, higher cost of capital?Inadequate employee motivation?Reduced innovation?Low reliability?, 2006 Pearson Education Canada Inc.,8-7,Employee Stock Options, Contd.,Problems Of Black/Scholes Applied To ESOsBlack/Scholes assumes freely traded American optionsESOs cannot be exercised until they vestExposure draft proposed using expected time to exercise in Black/ScholesTime to exercise is highly variable (early exercise)Leads to low reliabilityMay overstate fair value (Huddart (1994), Marquardt (2002), 2006 Pearson Education Canada Inc.,8-8,Employee Stock Options, Contd,FASB Backs DownSFAS 123: Disclosure in notes allowedUse Black/Scholes formula with expected time to exercise, 2006 Pearson Education Canada Inc.,8-9,Employee Stock Options, Contd,More recent developmentsEnron, WorldCom financial reporting scandalsConcerns over “pump and dump” behaviourRenewed pressure to expense ESOsIn Canada and internationally, ESOs expensed from 2004In U.S., ESOs expensed from June, 2005, 2006 Pearson Education Canada Inc.,8-10,Successful Efforts (SE) Accounting in Oil and Gas,Recall Full Cost v. SE ControversySE tends to lower reported earnings, especially for actively exploring companiesNote no effects on cash flowsSFAS 19 (1977) exposure draftRequired SEStrong manager objectionsLev (1979) documented negative share price reaction for affected firms. Why?Today, firms can use either method, 2006 Pearson Education Canada Inc.,8-11,Positive Accounting Theory (PAT), 2006 Pearson Education Canada Inc.,8-12,What is PAT?,Studies Managers Accounting Policy Choices, As Part of the Overall Process of Corporate GovernanceThat Is, Accounting Policies are Chosen StrategicallyPositive, Not Normative. Tries to Understand and Predict Managers Accounting Policy Choices., 2006 Pearson Education Canada Inc.,8-13,ASSUMPTIONS OF PAT,Managers are Rational (Like Investors) Conflict (Between Interests of Managers and Investors)Efficient Securities MarketEfficient Managerial Labour MarketBut may be inside information about manager effort and ability (moral hazard problem)A second major role for financial reporting-to report on manager effort and ability, 2006 Pearson Education Canada Inc.,8-14,The 3 Hypotheses of PAT,Bonus Plan HypothesisDerives from managerial incentive contractsDebt Covenant HypothesisDerives from debt contractsPolitical Cost HypothesisVery large firms minimize political “heat”NB: Contacts are Rigid, 2006 Pearson Education Canada Inc.,8-15,Managing Reported Earnings,Ways to Do ItChanging accounting policiesManaging discretionary accrualsTiming of adoption of new accounting standardsChanging real variables-R&D, advertising, repairs & maintenanceSPEs (Enron), capitalize operating expenses (WorldCom), 2006 Pearson Education Canada Inc.,8-16,Managing Reported Earnings Through Discretionary Accruals,NI = OCF Net Accruals = OCF Net Non-Discretionary Accruals Net Discretionary AccrualsExamples of Discretionary AccrualsAllowance for doubtful accountsProvision for reorganization, 2006 Pearson Education Canada Inc.,8-17,Estimating Discretionary Accruals,Use Total Accruals as ProxyHealy (1985)Examine Specific AccountsAccounts receivable & allowanceMcNichols & Wilson (1988), 2006 Pearson Education Canada Inc.,8-18,Estimating Discretionary Accruals, Contd,The Jones Model TAjt = j + 1jREVjt + 2jPPEjt + jt Estimate by least-squares regressionDiscretionary accruals = actual - predictedThe s and s are coefficients to be estimated. No relation to a shares beta, 2006 Pearson Education Canada Inc.,8-19,2 Versions of PAT,Opportunistic VersionManagers choose accounting policies for their own benefitEfficient Contracting VersionManagers choose accounting policies to attain corporate governance objectives of the firm, 2006 Pearson Education Canada Inc.,8-20,Distinguishing Opportunistic v. Efficiency Versions of PAT,Hard to DoMian & Smith (1990)Consolidated financial statementsChristie & Zimmerman (1994)Takeover targetsDichev & Skinner (2002)Debt covenants, 2006 Pearson Education Canada Inc.,8-21,Distinguishing Opportunistic v. Efficiency Versions of PAT, Contd,Hard to Do, ContdDechow (1994)Net income more highly associated with share returns than cash flowsGuay (1999)Limit firm risk using derivatives, 2006 Pearson Education Canada