Question 1

With most economies moving toward a carbon constrained economy using Institutional Theory discuss how corporate social responsibility reporting could gain legitimacy.

Accepted Answer

Institutional Theory suggests that organ

Question 2

In the situation where a contractual arrangement has been negotiated that provides managers with a bonus based on the profits generated by the entity:

Accepted Answer

A)  The efficiency perspective identifies this as a way of minimising agency costs by aligning the interests of the principal and the agent. 
B)  The opportunistic perspective predicts that managers will seek to adopt accounting methods that best reflect the performance of the organisation. 
C)  The underlying premise of PAT is that agents (managers) aim to act in the best interests of the organisation, so the bonus is recognition of those efforts. 
D)  The efficiency perspective identifies this as a way of minimising agency costs by aligning the interests of the principal and the agent and the opportunistic perspective predicts that managers will seek to adopt accounting methods that best reflect the performance of the organisation. 
A)  The efficiency perspective identifies this as a way of minimising agency costs by aligning the interests of the principal and the agent. 
B)  The opportunistic perspective predicts that managers will seek to adopt accounting methods that best reflect the performance of the organisation. 
C)  The underlying premise of PAT is that agents (managers) aim to act in the best interests of the organisation, so the bonus is recognition of those efforts. 
D)  The efficiency perspective identifies this as a way of minimising agency costs by aligning the interests of the principal and the agent and the opportunistic perspective predicts that managers will seek to adopt accounting methods that best reflect the performance of the organisation.

Question 3

Normative theories are referred to as prescriptive theories.

Accepted Answer

A) True 
 B)False

Question 4

The ethical perspective of stakeholder theory is consistent with the efficiency view in Positive Accounting Theory.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following accounting policies is consistent with 'creative accounting'?

Accepted Answer

A)  A firm with management compensation contract changes its depreciation policy from straight-line to accelerated rate method. 
B)  A start-up firm adopts a policy to expense research and development expenses as incurred. 
C)  A profit making tobacco producing firm changes its depreciation policy from straight-line to accelerated rate method. 
D)  A firm with debt contracts shifts inventory accounting policy from FIFO to LIFO method. 
A)  A firm with management compensation contract changes its depreciation policy from straight-line to accelerated rate method. 
B)  A start-up firm adopts a policy to expense research and development expenses as incurred. 
C)  A profit making tobacco producing firm changes its depreciation policy from straight-line to accelerated rate method. 
D)  A firm with debt contracts shifts inventory accounting policy from FIFO to LIFO method.

Question 6

Theorists' own values or ideological predispositions may be among the factors that determine which side of the argument they will adopt in respect to disputable connections in a theory with evidence.

Accepted Answer

A) True 
 B)False

Question 7

To comply with AASB 101,in which section of the financial report should a summary of accounting policies adopted by reporting entities be positioned?

Accepted Answer

A)  anywhere in the notes to the accounts as long as this is disclosed 
B)  anywhere in the financial report 
C)  initial section of the notes to the accounts 
D)  middle section of the notes to the accounts 
A)  anywhere in the notes to the accounts as long as this is disclosed 
B)  anywhere in the financial report 
C)  initial section of the notes to the accounts 
D)  middle section of the notes to the accounts

Question 8

What is Institutional Theory and why is relevant to financial reporting research?

Accepted Answer

Institutional Theory is a sociological t

Question 9

Legitimacy Theory relies on the notion that there is a ________ _________ between an organisation and the society in which it operates.

Accepted Answer

A)  formal agreement 
B)  social contract 
C)  working relationship 
D)  government regulation 
A)  formal agreement 
B)  social contract 
C)  working relationship 
D)  government regulation

Question 10

Distinguish between opportunistic and efficient contracting versions of positive accounting theory.

Accepted Answer

Positive accounting theory (PAT) is a br

Question 11

A firm is close to violating the current ratio debt covenant in one of its loan agreements.Which accounting action would you recommend to reduce the likelihood of a technical violation?

Accepted Answer

A)  The firm should pay it accounts receivable. 
B)  The firm should obtain more debts from its suppliers. 
C)  The firm should call to convert a note payable to equity. 
D)  The firm should sell non-performing assets. 
A)  The firm should pay it accounts receivable. 
B)  The firm should obtain more debts from its suppliers. 
C)  The firm should call to convert a note payable to equity. 
D)  The firm should sell non-performing assets.

Question 12

Legitimacy Theory and Stakeholder Theory may both generate similar hypotheses to Positive Accounting Theory.The difference between PAT and the other two theories is that:

Accepted Answer

A)  different research methods are applied. 
B)  PAT does not explicitly consider the organisation in its broader social context. 
C)  PAT is the only theory that takes a 'positive' research perspective. 
D)  PAT considers owners and managers who cannot be considered legitimate stakeholders. 
A)  different research methods are applied. 
B)  PAT does not explicitly consider the organisation in its broader social context. 
C)  PAT is the only theory that takes a 'positive' research perspective. 
D)  PAT considers owners and managers who cannot be considered legitimate stakeholders.

Question 13

A company has a debt covenant in place that limits the amount it can borrow to 50% of its tangible assets.If the company's actual value for that ratio is approaching violation of this debt covenant,consistent with PAT,management would try to relax the constraint by:

Accepted Answer

A)  switching from straight-line depreciation to reducing balance method. 
B)  increasing allowance for doubtful debts from 5% to 10%. 
C)  increasing provision for warranty expenses. 
D)  revaluing assets upwards. 
A)  switching from straight-line depreciation to reducing balance method. 
B)  increasing allowance for doubtful debts from 5% to 10%. 
C)  increasing provision for warranty expenses. 
D)  revaluing assets upwards.

Question 14

A new accounting standard requires the provision of liabilities for share-based payments that has implications in the firm's debt-to-equity ratio.Which of the following accounting policy choices will reduce the probability of the firm violating debt covenants in a debt agreement?

Accepted Answer

A)  Expense all research and development costs. 
B)  Shift from FIFO to weighted average inventory method. 
C)  Shift from straight-line to accelerated method of depreciation. 
D)  Shift from cost to revaluation method in accounting for land and buildings. 
A)  Expense all research and development costs. 
B)  Shift from FIFO to weighted average inventory method. 
C)  Shift from straight-line to accelerated method of depreciation. 
D)  Shift from cost to revaluation method in accounting for land and buildings.

Question 15

'A company can be creative in preparing its accounts and yet still be within bounds of acceptable accounting policies.' Explain.

Accepted Answer

A company can be creative in preparing i

Question 16

PAT outlines the best (or most positive)way of preparing accounting reports.

Accepted Answer

A) True 
 B)False

Exam 3: Theories of Accounting

With most economies moving toward a carbon constrained economy using Institutional Theory discuss how corporate social responsibility reporting could gain legitimacy.

In the situation where a contractual arrangement has been negotiated that provides managers with a bonus based on the profits generated by the entity:

Normative theories are referred to as prescriptive theories.

The ethical perspective of stakeholder theory is consistent with the efficiency view in Positive Accounting Theory.

Which of the following accounting policies is consistent with 'creative accounting'?

Theorists' own values or ideological predispositions may be among the factors that determine which side of the argument they will adopt in respect to disputable connections in a theory with evidence.

To comply with AASB 101,in which section of the financial report should a summary of accounting policies adopted by reporting entities be positioned?

What is Institutional Theory and why is relevant to financial reporting research?

Legitimacy Theory relies on the notion that there is a ________ _________ between an organisation and the society in which it operates.

Distinguish between opportunistic and efficient contracting versions of positive accounting theory.

A firm is close to violating the current ratio debt covenant in one of its loan agreements.Which accounting action would you recommend to reduce the likelihood of a technical violation?

Legitimacy Theory and Stakeholder Theory may both generate similar hypotheses to Positive Accounting Theory.The difference between PAT and the other two theories is that:

A company has a debt covenant in place that limits the amount it can borrow to 50% of its tangible assets.If the company's actual value for that ratio is approaching violation of this debt covenant,consistent with PAT,management would try to relax the constraint by:

A new accounting standard requires the provision of liabilities for share-based payments that has implications in the firm's debt-to-equity ratio.Which of the following accounting policy choices will reduce the probability of the firm violating debt covenants in a debt agreement?

'A company can be creative in preparing its accounts and yet still be within bounds of acceptable accounting policies.' Explain.

PAT outlines the best (or most positive)way of preparing accounting reports.

An Overview of the Australian External Reporting Environment

The Conceptual Framework of Accounting and Its Relevance to Financial Reporting

An Overview of Accounting for Assets

Depreciation of Property, plant and Equipment

Revaluations and Impairment Testing of Non-Current Assets

Inventory

Accounting for Intangibles

Accounting for Heritage Assets and Biological Assets

An Overview of Accounting for Liabilities

Accounting for Leases

Accounting for Employee Benefits

Share Capital and Reserves

Accounting for Financial Instruments

Revenue Recognition Issues

The Statement of Comprehensive Income and Statement of Changes in Equity

Accounting for Share-Based Payments

Accounting for Income Taxes

The Statement of Cash Flows

Accounting for the Extractive Industries

Accounting for General Insurance Contracts

Accounting for Superannuation Plans

Events Occurring After the End of the Reporting Period

Segment Reporting

Related Party Disclosures

Earnings Per Share

Accounting for Group Structures

Further Consolidation Issues I: Accounting for Intragroup Transactions

Further Consolidation Issues II: Accounting for Non-Controlling Interests

Further Consolidation Issues IV: Accounting for Changes in the Degree of Ownership of a Subsidiary

Accounting for Equity Investments,including Investments in Associates and Joint Arrangements

Accounting for Foreign Currency Transactions

Translating the Financial Statements of Foreign Operations

Accounting for Corporate Social Responsibility

Filters

Legitimacy Theory relies on the notion that there is a _ between an organisation and the society in which it operates.