Course Outline

Accounting Theory
Fall 2014
Department of Accountancy
John Molson School of Business
Concordia University
General Information
Course Number: ACCO 400
Sections: A and AA
Credits: 3
Class day, time, and location:
Section A:

Tuesday, 11:45-14:30, MB-2.435

Section AA: Tuesday, 17:45-20:15, MB-S2.115

Professor: Luo HE, Ph.D.
E-mail: lhe@jmsb.concordia.ca
Telephone: (514) 848-2424 ext. 2730
Office Location: MB 14-239
Office Hours: Wednesday 15:00 17:00
And by appointment
(Check the FirstClass course folder for any changes.)

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Course Description
This course examines the theoretical foundations of the contemporary approach to financial
reporting, and the pragmatic and political considerations in the development of the conceptual
framework underlying current accounting standards. Alternative theories of accounting are
discussed and controversial areas are emphasized.

Learning Goals
The primary goal of this course is to advance your understanding of financial accounting and to
develop your ability to critically analyze financial reporting practices. Numerous parties are
involved in preparing firms financial reports, such as accountants, managers, auditors and
regulators. Also, financial statements target a diverse constituency, including stock market
investors, debt holders, financial analysts and the government. This course analyzes how these
various parties affect financial accounting and determine what appears in financial reports. To
do so, the course relies on economic theories and academic research.
By learning this course, you should develop an understanding of the different theories we study.
More importantly, you should learn to think in a theoretical way, foster the ability to abstract from
the particulars of a situation, and be able to explain why financial accounting practices are the
way they are in terms of underlying theories. Finally, you should be able to apply proper theories
to critically analyze current issues being considered in contemporary accounting literature.

Instructional and Learning Methods

This senior level course focuses on inculcating a culture of self-learning. The instructor is a
facilitator who encourages students to engage in the process of self-learning. While I use
lectures from time to time to illustrate some financial accounting theories and issues, selfreading, class discussion, group presentations and projects will be the key modes of learning for
you. The most effective learning takes place through a process of self-discovery via personal
reading, interactions with peers and the instructor both in and after class, and preparation for
the group presentation and project. What you gain from this course depends very much on
YOU. Your own preparation and the effort you exert will determine how much you learn from
this course.
Please note that the use of laptops for whatever purpose is not permitted during class.

Course Materials

Required textbook: Financial Accounting Theory, Seventh Edition, by William R. Scott,

Pearson Education Canada.
Class slides: The slides used during lectures are available through FirstClass. However,
please take notes in class, which are an integral part of the required material.

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Course Evaluation
Grading Grid
Your final grade will be determined based on the total marks you have earned and your relative
performance compared with your peers. (That is, a numeric grade of 90 or above is not
necessarily equal to A+ if more than 5% of students get that grade.) Given that one class could
perform systematically better than another, students of all the sections I teach will be combined
together for grading purposes. Therefore, the chart below displays the grade distribution of all
the students taking ACC0 400 with me this term, not just those in your own section.
Relative Position
among Peers (Percentile)
Top 5%

Percentage of
Each Grade Group

Final Letter Grade

5%

A+

6% to 15%

10%

16% to 25%

10%

A-

26% to 45%

20%

B+

46% to 65%

20%

66% to 90%

25%

B-

Bottom 10%

10%

Total

C range and below

100%

Note: For students in the bottom 10% range, instructor discretion will be used to determine the
final letter grade.
Evaluation Components
I. Individual Work
1) Class attendance and contribution to class discussion
2) Final exam
II. Group Work
1) Group presentation
2) Group report
Total

15%
45%
10%
30%

60%

40%
100%

I. Individual Work

Class attendance (5%): For this course, attending class is mandatory. Absence without
valid reasons will lead to grade deduction. (Note: A work schedule conflict is not considered
a valid reason for missing a class.) Attendance check starts from Week 3.

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 Weekly assignment and contribution to class discussion (10%): Most weeks I or the
presentation group will give some short questions in preparation for the following class. You
are expected to have read the required readings and have carefully thought about the
assigned questions in order to actively participate in class discussion. Each student bears
the responsibility of contributing to the understanding of the topics being studied.
Contributing to class discussion provides you opportunities to develop skills in oral
communication, presenting your point of view, helping your colleagues to learn, and
learning from your colleagues. These skills are as valuable as the accounting techniques
you will learn from this course.
It is important to note that failure to contribute can have a significant negative impact on
your final grade of the course. Merely attending the class is not sufficient. For greater
clarity, if you do not contribute to class discussion, you will receive 0% for this component.
Contributions can be made via thoughtful comments, questions, arguments, and analyses.
Both the quantity and quality of your speaking will be considered in assessing your
contribution. The general rule is that if you speak thoughtfully at least once in ten or more
classes, you earn the full mark. In other words, contributing to discussion at least once in a
class normally equals 1% of the course grade (1% per class x 10 classes = 10%). Negative
contributions showing lack of preparation will lower your contribution grade.
To facilitate class discussion, please use the sample name tag to make one for yourself
and display your name each class.
Evaluation of contribution to class discussion starts from Week 2. Follow the sample record
below to prepare your memo and submit it to the instructor after class.

Sample Record of Class Contribution

Name (Print):______________

Student ID: ______________

Briefly describe your contrition to class discussion today. One short sentence is sufficient. If
you speak multiple times today, choose the one that you believe is the most thoughtful.
For example:

Challenged the assumptions of market efficiency

Discussed the importance of full disclosure
Commented on recent development of the rationality theory
Illustrated the computation of beta
Explained the risk-averse and risk-neutral utility functions
Asked the implications of good earnings management for regulators

Note: Untruthful reporting is a grave offense against academic integrity and will lead
to severe consequences.
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 Final examination (45%): There will be a three-hour final exam scheduled in the regular
final examination period. One third of the exam will be common for all the students taking
this course this term; two thirds of the exam will be determined by individual instructors.
II. Group Work
Groups of five students are to be formed by Week 3. (The instructor may suggest a slightly
smaller group size depending on the class enrollment.) Please note that peer evaluation will be
considered to determine a students final mark of group work if group members choose to
submit the peer evaluation form.
Group presentation (10%): This course includes a substantial seminar program. Starting
from Week 4, one group will be required to lead a seminar discussion. The presentation
topic will be assigned in class on Week 3. See a separate document for guidelines of the
group presentation.
Group report (30%): The group report gives you the opportunity to investigate a financial
accounting issue of interest to your group. A brief proposal of your group project is due on
Week 7. The final written report is due on Week 13, the last class. Instructions of the report
will be distributed by Week 3.

Academic Integrity
The most common offense under the Academic Code of Conduct is plagiarism which the Code
defines as the presentation of the work of another person as ones own or without proper
acknowledgement. This could be material copied word for word from books, journals, internet
sites, professors course notes, etc. It could be material that is paraphrased but closely
resembles the original source. It could be the work of a fellow student, for example, an answer
on a quiz, data for a lab report, a paper or assignment completed by another student. It might be
a paper purchased through one of the many available sources. Plagiarism does not refer to
words alone - it can also refer to copying images, graphs, tables, and ideas. Presentation is
not limited to written work. It also includes oral presentations, computer assignments and artistic
works. Finally, if you translate the work of another person into French or English and do not cite
the source, this is also plagiarism.
In simple words:
Do not copy, paraphrase or translate anything from anywhere without saying where you
obtained it!
(Source: http://www.concordia.ca/students/academic-integrity.html)

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Disclaimer
In the event of extraordinary circumstances beyond the University's control, the content and/or
evaluation scheme in this course is subject to change.
In addition, the instructor reserves the right to make changes to some of the topics covered,
homework and assignments, dates, and grading policies at any time during the semester. These
changes may be updated via the FirstClass course folder and/or will be announced in class.
Students are responsible for catching up with classmates for any announcements even (or
especially) if absent from class.

Support Services at Concordia

Concordia University offers many on-campus support services that are available to students
free of charge. The web link http://www.concordia.ca/students/help4u.html is a useful facility that
guides students to a specific support service that can provide appropriate assistance.

Concordia Counselling and Development offers career services, psychological services,

student learning services, etc.
http://www.concordia.ca/offices/cdev.html

Advocacy and Support Services

http://www.concordia.ca/offices/advocacy.html

Student Transition Centre

http://www.concordia.ca/extended-learning/advising.html

New Student Program

http://www.concordia.ca/students/new.html

Access Centre for Students with Disabilities

http://www.concordia.ca/offices/acsd.html

Student Success Mentor

http://www.concordia.ca/students/new/success/mentoring.html

The Academic Integrity Website

http://www.concordia.ca/students/academic-integrity.html

Financial Aid & Awards Office

http://www.concordia.ca/offices/faao.html

Health Services

https://www.concordia.ca/students/health.html

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Tentative Class Schedule

Week 1

Introduction to Accounting Theory

Scott, Chapter 1

Week 2

Accounting under Ideal Conditions

Scott, Chapter 2

Week 3

The Decision Usefulness Approach to Financial

Reporting
Scott, Chapter 3
[Group list due and group presentation topic decided]

Week 4

Efficient Securities Markets

Scott, Chapter 4
[Group A presentation]

Week 5

The Value Relevance of Accounting Information

Scott, Chapter 5
[Group B presentation]

Week 6

The Measurement Approach to Decision Usefulness

Scott, Chapter 6 (skip 6.10.2 & 6.12)
[Group C presentation]

Week 7

Measurement Applications
Scott, Chapter 7 (skip 7.5.4 & 7.6)
[Proposal of group project due]
[Group D presentation]

Week 8

The Efficient Contracting Approach to

Decision Usefulness
Scott, Chapter 8
[Group E presentation]

Week 9

An Analysis of Conflict
Scott, Chapter 9 (skip 9.3.2 & 9.3.4)
[Group F presentation]

Week 10

Executive Compensation
Scott, Chapter 10 (skip 10.4.2)
[Group G presentation]

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Week 11

Earnings Management
Scott, Chapter 11 (skip 11.5.2)
[Group H presentation]

Week 12

Standard Setting: Economic Issues

Scott, Chapter 12
[Group I presentation]

Week 13

Standard Setting: Political Issues;

Summing Up / Review
Scott, Chapter 13 (skip 13.6)
[Group report due]
[Group J presentation]

Note: Other readings may be added in various weeks to reflect current issues in accounting
theory.

Calendar Dates of Class Schedule

Sept.

Oct.

Nov.

Mon

Tue

Wed

Thu

Fri

Sat

Sun

# Week

#1

10

11

12

13

14

#2

15

16

17

18

19

20

21

#3

22

23

24

25

26

27

28

#4

29

30

#5

10

11

12

#6

13

14

15

16

17

18

19

#7

20

21

22

23

24

25

26

#8

27

28

29

30

31

#9

# 10

10

11

12

13

14

15

16

# 11

17

18

19

20

21

22

23

# 12

24

25

26

27

28

29

30

# 13

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