Accounting Theory (FAR 600) - Lesson Plan

Mar 2015

FAKULTI PERAKAUNAN
UNIVERSITI TEKNOLOGI MARA
40450, SHAH ALAM
Semester: 8
PROGRAM NAME
PROGRAM CODE
COURSE NAME
COURSE CODE
LECTURE
TUTORIAL
RESOURCE PERSON

: BACHELOR DEGREE OF ACCOUNTANCY (HONS)

: AC220
: ACCOUNTING THEORY
: FAR 600
: 2 hours/week
: 1 hour/week
: Erolyn Samuel

COURSE OUTCOMES
CO1

Discuss the various theories and paradigms in accounting.

CO2

Demonstrate an understanding on the concept of Islamic Accounting, the need for it and its differences to conventional
accounting.

CO3

Evaluate the evolution of the conceptual framework and standard setting process, nationally and internationally.

CO4

Evaluate the relationship between accounting theories and framework to the practice in the real world.

Lesson plan/FAR600

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Accounting Theory (FAR 600) - Lesson Plan

Mar 2015

PROGRAM OUTCOMES
PO1

Able to apply knowledge and understanding of accounting and accounting related fields

PO2 Able to prepare accounts, budgets, and costing information, and assist in tax returns, the audit
process and finance functions
PO3 Able to interpret and analyze financial and non-financial information
PO4 Able to assist in financial and managerial accounting reporting for decision making purposes
PO5 Able to coordinate with different functions of the management team
PO6 Able to apply values, ethics, morality and professionalism in their work
PO7 Able to engage in life-long learning
PO8 Able to apply managerial and entrepreneurial skills
PO9 Able to apply managerial and entrepreneurial skills

Lesson plan/FAR600

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Accounting Theory (FAR 600) - Lesson Plan

Mar 2015

CO-PO MATRIX
PO1 PO2

PO3

PO4

CO1

CO2

CO3

CO4

PO5

PO6

PO7

PO8

PO9

PROGRAM EDUCATIONAL OBJECTIVES (PEO):

AFTER COMPLETING THIS PROGRAM, graduates would be:
PEO 1
PEO 2
PEO 3
PEO 4

Competent accounting technician who understand and are able to analyze

financial information in providing quality accounting services
Accounting Technicians who are ethical and professional in providing
services to stakeholders
Accounting Technicians who lead and engage in teams in identifying
accounting issues through effective communication abilities.
Accounting technicians who continue to advance his/her knowledge and
abilities by utilizing ICT in managing information and exploring entrepreneurial
activities.

Lesson plan/FAR600

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Accounting Theory (FAR 600) - Lesson Plan

Mar 2015

CO-PEO MATRIX
PEO1

PEO2

PEO3

PEO4

CO1

CO2

CO3

CO4

Lesson plan/FAR600

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Accounting Theory (FAR 600) - Lesson Plan

Mar 2015

PLAN STRUCTURE

WEEK

TOPIC

Historical development
of accounting

CONTACT
HOURS

TOPIC OUTCOME (TO)

CO

LECTURE/TUTORIAL COVERAGE

Discuss the development of

accounting principles in the
USA
Discuss the development of
accounting theory
3 (3L)

PO

LEARNING
MODEL

Ability to:
Entrance
Survey

describe the historical development of

accounting in the USA from 1900 to
today
appreciate and comprehend the need
to know and understand the relevance
of history to the development and
regulation of accounting and reporting
practices
discuss
the
development
of
accounting theory

C03

PO6
PO7

ASSESSMENT

ENTRANCE
SURVEY

Lecture
Group
discussion

Test

Ability to:
2

(Specific to the 4 articles

provided)

Accounting In Islam

3(2L/1T)

Lesson plan/FAR600

Accounting systems and

recording procedures in the
Early Islamic State
Were Islamic records
precursors to accounting books
based on the Italian method?
Islamic Accounting A Primer
The emerging issues in the
objectives and characteristics
of Islamic Accounting for
Islamic business organisations.

Describe the history and development

of accounting in Islam
Describe Islamic accounting:
o Definition
o Objective and characteristics of
Islamic accounting
o Fundamental Islamic values to
business activities
Discuss the need for Islamic
accounting
Compare the characteristics of Islamic
accounting versus conventional
accounting
Discuss the concept of accountability

Lecture
CO1
CO2
CO3

PO1
PO3
PO4
PO5
PO6
PO7

Group
discussion

Test

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Accounting Theory (FAR 600) - Lesson Plan

3-5

Accounting Theory
Construction
Positive Theory of
Accounting (PAT) Policy
and Disclosure
Capital Market Research

3 (2L/1T)

Theory formulation
Pragmatic Theories
o Descriptive pragmatic
approach
o Psychological pragmatic
approach
Syntactic and Semantic
Theories
Normative Theories
Positive Theories

PAT
Contracting Theory
Agency Theory
Political Processes
Philosophy
of
Positive
Accounting Theory
Strengths of Positive Theory
o Dissatisfaction with
prescriptive standards
Scope of Positive Accounting
Theory

6-8

Applying Theory to

Lesson plan/FAR600

Theories relevant to the

practice of accounting and

Mar 2015

in Islam and how it is applied to

financial reporting practices.
Discuss Corporate reporting from an
Islamic perspective

Ability to:
Differentiate
the
different
classifications of theories
understand
how
pragmatic
approaches to theory development
apply to accounting
understand normative true income
theories and decision usefulness
approach to accounting theory
criticise historical cost accounting as a
theoretical model
Strengths and weaknesses of the
different
approach
to
theory
development
Discuss the philosophy of PAT
o Explain contracting theory
o Explain agency theory
- price protection and agency
problems
- how accounting is used in
contractual specifications to
reduce the agency costs of
equity and debt
- how accounting can be used to
reduce the political costs faced
by the firm
- key criticisms of contracting
theories of accounting choice

Lecture
CO1
CO3
CO4

PO1
PO4
PO5
PO7

Test

Group
discussion

Ability to:
PBL

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Accounting Theory (FAR 600) - Lesson Plan

Accounting Regulation
The Theories of
Regulation Relevant to
Accounting and Auditing
How Theories of
Regulation Apply to
Accounting and Auditing
Practice
The Regulatory
Framework for Financial
Reporting
Statutory Requirements
The Institutional
Structure for Setting
Accounting and Auditing
Standards
Standard Setting in
Malaysia

Lesson plan/FAR600

9 (6L/3T)

auditing
Theory of Efficient Markets
Agency Theory
Theories of Regulation and
their applications
Public interest theory
Regulatory capture theory
Private interest theory
Standard Setting as a Political
Process
Statutory requirements
Corporate Governance
Auditors and Oversight
Independent Enforcement
Bodies
The Institutional Structure for
setting accounting and auditing
standards
The IASB and FASB
Convergence Program
Accounting Standards for the
Public Sector
International Auditing
Standards
Historical development of
financial reporting practice in
Malaysia
Explain current financial
reporting regime in Malaysia
Describe the move towards
convergence with
International Accounting
Standards
Identify the challenges for
standard setting

Understand
the
rationale
for
regulating
financial
accounting
practice
Argue for and against the existence of
accounting regulation
Describe some of the theoretical
perspectives used to explain the
existence of regulation
Explain how and why various groups
within society try to influence the
accounting standard-setting process
Discuss some of the theories used to
explain
what
influences
the
accountant to choose one accounting
method in preference to another
Discuss the impact of the standardsetting process on the output of the
development of accounting regulation
Describe the historical development of
financial reporting practice in Malaysia
Explain current financial reporting
regime in Malaysia
Describe the move towards
convergence with International
Accounting Standards
Identify the challenges for standard
setting

Mar 2015

(Grp Project)
Lecture
CO1
CO3
CO4

PO1
PO4
PO5
PO6
PO7
PO9

Final Exam
Group
discussion
Tutorial

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Accounting Theory (FAR 600) - Lesson Plan

Normative Theories of
Accounting The Case
of Conceptual
Framework (CF) Projects

Lesson plan/FAR600

6(3L/3T)

What is a Conceptual
Framework (CF) of
Accounting?
A Brief Overview of the History
of the Development of CFs
o The Trueblood Report
o The FASB Conceptual
Framework Project
o The (UK) Corporate Report
o Development of CFs in
Australia and Elsewhere
o Current Efforts of the IASB
and the FASB
Building Blocks of a
Conceptual Framework
o Definition of the Reporting
Entity
o Users of Financial Reports
o Objectives of General
Purpose Financial Reporting
o Qualitative Characteristics of
Financial Reports
o Balancing Relevance and
Reliability
o Can Financial Statements
Provide Neutral and
Unbiased Accounts of an
Entitys Performance and
Position?
o Definition of the Elements of
Financial Reporting
o Definition of Assets
o Definition of Liabilities
o Definition of Equity
o Definition of Income
o Definition of Expenses
o Recognition of the Elements

Ability to:
Explain the history of the development
of various past CF projects
Understand the role that a CF can play
in the practice of financial reporting
Identify, explain and critically evaluate
the various building blocks that have
been developed within the CF
Identify factors including political
factors that might help or hinder the
development of CF project
Explain which groups within society
that are likely to benefit from the
establishment and development of CF
of accounting

CO3
CO4

PO1
PO2
PO3
PO4
PO5
PO6
PO7

Mar 2015

Lecture
Group
discussion

PBL
(Grp Project)

Final exam
Tutorial

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Accounting Theory (FAR 600) - Lesson Plan

Mar 2015

of Financial Reporting
o Measurement Principles
Benefits Associated with
Having a CF
CFs as a Means of
Legitimising Standard-Setting
Bodies

10-11

Accounting
Measurement Systems

Lesson plan/FAR600

6(3L/3T)

Three Main Income and

Capital Measurement
Systems
Historical Cost Accounting
o Objective of Accounting
o Capital and profit
o Matching of Costs Theory
o Conservatism
o Arguments for Historical Cost
Accounting
o Criticisms of Historical Cost
Accounting
Current Cost Accounting
o Objective of Current Cost
Accounting
o Concept of Business Profit
and Financial Capital
o Holding Gains and Losses
o Why Holding Gains are a
Component of Profit
o Financial Capital versus
Physical Capital
o In support of Physical Capital
o Arguments For and Against
Current Cost
o More Specific Criticisms
Exit Price Accounting

Ability to:

Describe and explain the different

versions of measurement of income
and capital i.e. Historical Cost, Current
Cost and Exit Price Accounting
Explain the basis for acceptance for
each of the different measurements
Discuss the concepts of capital and
income under Historical cost and
Current Cost measures.
Arguments for and against each of the
three versions of measurements
Discuss the difference between value
in use and value in exchange

CO1
CO4

PO1
PO3
PO4
PO5
PO6
PO7

Lecture
Group
discussion
Tutorial

PBL
(Grp Project)

Final exam

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Accounting Theory (FAR 600) - Lesson Plan

Mar 2015

o Income and Capital

o Objective of Accounting
o Arguments For Exit Price
Accounting
o Arguments Against Exit Price
Accounting
Value in Use Versus Value in
Exchange

Creative Accounting
12-13
Earnings Management
Evidence of Earnings
Management for Bonus
Purposes
Other Motivations for
Earnings Management
Patterns of Earnings
Management
Why Does Earnings
Management Persist?

6(3L/3T)

Discuss the issues related to

creative accounting
Discuss the techniques of
creative accounting
Discuss the concept of ethics
from the perspectives of
creative accounting

Other Contractual Motivations

Political Motivations
Taxation Motivations
Changes of CEO
Initial Public Offerings
To Communicate Information to
Investors

Ability to

Describe and differentiate between

creative accounting and earnings
management
Explain common creative accounting
patterns
Discuss
some
applications
of
accounting techniques that relate to
both earnings management and/or
creative accounting
Discuss the motivations behind the
practice of earnings measurement and
creative accounting
Discuss the good and bad sides of
earnings management and creative
accounting and their implications to
ethics and governance

CO1
CO4

PO1
PO3
PO4
PO5
PO6
PO7
PO9

Lecture
Group
discussion

PBL
(Case Study)
Final Exam

Tutorial

The Good Side of

Earnings Management
The Bad Side of
Earnings Management

Lesson plan/FAR600

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Accounting Theory (FAR 600) - Lesson Plan

14

Emerging Issues in
Accounting and Auditing

3 (2L/1T)

Current Factors Influencing

Accounting and Auditing
Research, Regulation and
Practice
XBRL
The Effects of Corporate
Collapses and the SarbanesOxley Act (2002)
Sustainability Accounting,
Reporting and Assurance
What is Sustainability
Accounting and Reporting?
Recent Developments in
Sustainability Reporting
Trends in Sustainability
Reporting Assurance
Why Seek Assurance for
Sustainability Reports?
Sustainability Assurance
Standards
Other Non-Financial
Accounting and Reporting
Issues
Water Accounting
Water Accounting versus
Green House Gas Emission
Accounting

Lesson plan/FAR600

Ability to:
Explain and discuss how the
technological revolution of XBRL
could affect the way that financial
statement are prepared including its
pros and cons
Discuss the impact of corporate
collapses and how they have
changed the image of accounting
and accounting and its regulatory
environments
Describe Corporate Social Reporting
Practices in Malaysia
Explain
how
community
or
stakeholders
perception
can
influence the disclosure policies of
an organisation
Explain why an entity might elect to
make
particular
voluntary
disclosures
Explain the concept of sustainable
development and how organisations
are reporting their progress towards
the goal of sustainable development
Identify some of the limitations of
traditional financial accounting in
enabling users of reports to assess a
reporting
entitys
social
and
environmental performance
Describe triple bottom line reporting
Explain how other non-financial
reporting standards with regards to
water accounting and greenhouse
gas emission accounting become
indicators of an important future for
accounting

Mar 2015

Lecture
CO1
CO3
CO4

PO1
PO3
PO4
PO5
PO6
PO7
PO9

Group
discussion

PBL
(Grp Project)
Final Exam

Tutorial
EXIT
SURVEY

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Accounting Theory (FAR 600) - Lesson Plan

COURSE ASSESSMENT/
EVALUATION

Mar 2015

Continuous Assessment:

15%
15%
10%
60%

Common Test
Group project (Report and class presentation)
Group Case Study

Final comprehensive examination

Total

100%

GROUP PROJECT (Report 10%; Presentation 5%)

A comparative study on annual reports of two organizations from two distinct specialized industry sectors of the Main Market, Bursa Malaysia. The two
sectors identified for this semester are xxxx; and xxxx.
(Note: Four, with a maximum of five students, per group)
The project should include:
Business and economic literature review on the industries
Study on the background of the companies
Analysis of the differences and similarities of the two different industries with regards to:
o Statutory requirements
o Corporate governance
o Voluntary disclosure including:
- Corporate social responsibility
- Environmental issues
Any other observations peculiar to the annual reports
Report (10%):

Lesson plan/FAR600

Maximum of 10 pages excluding appendices

Font: Arial, Size 11
Spacing: 1
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Accounting Theory (FAR 600) - Lesson Plan

Mar 2015

Presentation (5%): (Using Power Point):

The presentation should be of high standard and it will be assessed according to the following criteria (among others):

Depth of Content
Quality of verbal presentation
Clarity of expression of ideas
Personal appearance

GROUP CASE STUDY (10 %)*

(Note: Two, with a maximum of three students, per group)

2,000 3,000 words

Font: Arial, Size 11
Spacing: 1

*Students will be informed of the chosen case and questions during the semester.

REFERENCES

Godfrey, J., Hodgson, A., Tarca, A., Hamilton, J. and Holmes, S. (2010). Accounting Theory, J Wiley. (7th Edition)
Scott, W.R. (2009). Financial Accounting Theory. Prentice Hall (5th Edition).
Deegan, C. (2014). Financial Accounting Theory. McGraw-Hill Irwin (4th Edition).
Belkaoui, Ahmed (2000), Accounting Theory, Business Press (4th Edition)

Lesson plan/FAR600

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Accounting Theory (FAR 600) - Lesson Plan

Mar 2015

Roshayani Arshad, Draft Chapter, Accounting Theory: Submitted to McGraw Hill.

Mulford, C. W. and Comiskey E. E. (2002). The Financial Numbers Game: Detecting Creative Accounting Practices. J Wiley
Sons (2nd Edition)
Other relevant readings and articles.
Journal articles for Topic 2 Islamic Accounting:
1) Omar A. Zaid. (2004). Accounting System & recording procedures in the early Islamic States. Accounting
Historian Journal.
2) Omar A. Z. (2000). Were Islamic Records Precursors to Accounting Books Based on the Italian Method?
Accounting Historian Journal
3) Shahul H. (2000) Islamic Accounting A Primer
4) Shahul H. and Rizal Y. (2005). The Emerging Issues on the Objectives and Characteristics of Islamic
Accounting for Islamic Business Organisations.

PLAGIARISM: The Faculty regards plagiarism as a very serious matter and takes action under the appropriate disciplinary regulations against students who are
involved in cases of plagiarism. Students are expected to discuss their work with peers and tutors. However, they are expected to present their own original
work and make material contribution to the group work.

Lesson plan/FAR600

Page 14