Stott’s Colleges 168 Exhibition Street, Melbourne Cricos code 00197D Bachelor of Business Semester 1 2017 UNIT OUTLINE SUBJECT TITLE ACC305 Accounting Theory COURSE Bachelor of Business PRE-REQUISITE Accounting for Business Decisions (ACC101) DURATION One Semester CREDIT POINTS: 15 ___________________________________________________________________________ LECTURER DETAILS Dr. Hani Alagha 168 Exhibition Street, Melbourne, Vic Phone 03 9663 3399 Email: [email protected] Preferred contact method: email Description: This course aims to expose students to the debate surrounding major accounting issues over the past decades, in particular, the attempts to establish a theory of accounting and the development of the conceptual framework for financial reporting. This subject will highlight the international nature of accounting and its problems as evidenced in the theoretical debates, standard setting and regulatory processes. In understanding and critically analysing these issues students will be exposed to the body of academic research that has contributed to the development of the accounting discipline, particularly to seminal works. As a final year subject that draws upon the learning students have gained thus far, students will be shown how to relate accounting theory to accounting practices that have been previously taught. In so doing, students will be able to improve their ability to evaluate and analyse accounting problems. Development of graduate attributes Graduates from the Bachelor of Business program are expected to have knowledge, skills and abilities (KSA) on three different dimensions. Each subject in your course contributes in some way to the development of the Stott’s Graduate Attributes which you should demonstrate by the time you complete your course Stott’s Colleges ACC305 Accounting Theory 2017 Semester 1 Page 2 Professional GA1 Hold a body of knowledge relevant to their field of study, that includes an understanding of theories, practices, and the scope of their discipline; GA2 Have the skills required to operate effectively within their chosen profession; Personal GA3 Have developed an appreciation, tolerance and ability to work effectively across the entire diversity spectrum; GA4 Be able to work independently and collaboratively; GA5 Be able to set appropriate goals for ongoing intellectual and professional development; GA6 Be self-critical and identify shortcomings in their own knowledge, skills and abilities GA7 Understand ethical responsibilities and behaviour pertinent to their chosen discipline and profession and practise the behaviour to the highest standards; GA8 Have developed a high level of oral, visual and written communication skills, across a range of communication technologies, relevant to their fields of study, and recognise the importance of maintaining these. Academic GA9 Be able to identify the need for data, information and knowledge to solve problems in familiar and unfamiliar contexts using appropriate media, tools and methodologies and be able to critically evaluate the information in terms of its validity, accuracy, currency against one’s own values. GA10 Be independent learners and thinkers with responsibility to acquire and evaluate new knowledge with the confidence to be analytical, creative and critical; GA11 Be able to understand, define, analyse, evaluate, investigate problems and make informed recommendations and decisions; Learning Outcomes: In this subject, students examine the major current issues in accounting and the emergence of the standard setting process and conceptual framework. Accounting is viewed from the theoretical perspective. At the completion of this subject a student should be able to: LO1 Evaluate attempts to develop and apply a conceptual framework, LO2 Appraise the objectives of accounting and relate them to the various concepts of accounting as studied in prior subjects, LO3 Analyse the applications of alternative measurement systems to historical cost, LO4 Evaluate current financial reporting and theoretical issues. Stott’s Colleges ACC305 Accounting Theory 2017 Semester 1 Page 3 CONTENT 1. Contemporary issues in accounting. 2. The conceptual framework for financial reporting 3. Standard setting 4. Measurement and annual reports 5. Theories in accounting 6. Capital market research and corporate governance 7. Earnings management 8. Sustainability and Environmental Accounting 9. Fair value accounting 10. Corporate failure 11. Special reporting issues 12. International Accounting LEARNING TASKS AND ASSESSMENT Assessment in this subject will consist of a combination of coursework and end-of-semester examination: Assessment Weight Due Learning Outcomes Assessed Graduate Attributes Assessed CPA Knowledge Area and Item Assessed* INDIVIDUAL ASSESSMENT–6 Fortnightly quizzes consisting of 20 multiple choice questions. These will take place online in class at the beginning of every 2nd week of semester. 20% Weeks 2,4, 6, 8, 10, & 12 LO 1, 2,3 & 4 GA 1, 3, 6 &9 KA 3.1 & 3.2 RESEARCH PAPER- Group Assignment. 3000 words 30% Week 10 LO 1, 2,3 & 4 GA 1, 3,4,6 & 9 KA 3.1, 3.2 & 3.3 FINAL EXAMINATION 50% TBA LO 1 – 4 inclusive GA 1, 3 4, 6 & 9 KA 3.1, 3.2 & 3.3 TOTAL 100% * CPA assessment only applicable for CPA subjects. Please refer to CPA documentation for Knowledge Areas In order to pass this subject, students are required to complete all assessment tasks and achieve an aggregate mark of 50% for the three assessment tasks. Students must achieve 50% in their Final Exam to pass this subject. Stott’s Colleges ACC305 Accounting Theory 2017 Semester 1 Page 4 WEEKLY OUTLINE Question for discussion, case studies, and current accounting issues will be given to students for practice and exam preparation. These questions and readings will be given to students in class to be workshopped the following week at the beginning of class. Students are strongly advised to attempt these questions prior to coming to class as it will prepare them for the Examination Week Topic Text reference Readings on Moodle Tutorial questions Week 1 -Introduction to Financial Accounting theory, The nature, construction and verification of theories Chapter 1 Reading 1.1 Reading 1.2 Week 2 Measurement in accounting Chapter 5 pp164-169 & 251-256 Reading 2.1 Reading 2.2 Reading 2.3 MC test on Ch 1 1.1, 1.3, 1.5, 1.8, 1.17 Week 3 Normative Accounting Theory Chapter 5 pp169 – 211 Chapter 6 5.13, 5.10, 5.14, 5.28 Week 4 Financial reporting environment Chapter 2 . MC test on Ch 5 & 6 6.10, 6.9, 6.19, 6.28 Week 5 Financial Accounting Regulation, The standard setting process Chapter 3 Readings 5.1 2.12, 2.13, 2.18, 2.25 Week 6 Positive Accounting Theory Chapter 7 Reading 6.1 Reading 6.2 MC test on Ch 2 &3 7.6, 7.11, 7.23, 7.34 MID SEMESTER BREAK Week 7 International Accounting Chapter 4 Reading 7.1 Reading 7.2 Reading 7.3 4.6, 4.10, 4.19, 4.20 Week 8 The history of accounting: Theoretical perspectives Reading 8.1 Reading 8.2 Reading 8.3 MC test on Ch 7 & 4 Week 9 Critical perspectives in accounting Chapter 12 Reading 9.1 TBA Week 10 Behavioural research in accounting Chapter 11 Reading 10.1 Reading 10.2 Reading 10.3 Reading 10.4 MC test on Ch 12 12.2, 12.3, 12.5, 12.6 Week 11 Considerations of System-Oriented Theories, Stakeholder, legitimacy and institutional theories Chapter 8 Reading 11.1 8.1, 8.37, 9.6, 9.10, 9.28, 8.14 Week 12 Social and environmental theories Chapter 9 MC test on Ch 11 and 8 Week 13 Revision Stott’s Colleges ACC305 Accounting Theory 2017 Semester 1 Page 5 Required text(s) Deegan, C. (2014). Financial accounting theory (4th ed.). North Ryde: McGraw Recommended additional references CPA Australia (2014) Accounting handbook, Melbourne, Pearson Education Australia. Drever, M., Stanton, P. & McGowan., S. (2007) Contemporary issues in accounting. Brisbane: John Wiley & Sons Gaffikin, M. (2008) Accounting Theory. Frenchs Forest, Pearson Education Australia Godfrey, J., Hodgson, A., Tarca, A., Hamilton, J., & Holmes, S. (2010) Accounting theory (7th ed.). Milton: John Wiley Henderson, S., Peirson, G., & Herbohn, K. (2010) Issues in financial accounting (14th ed.). Frenchs Forest: Pearson Australia Group Rankin, M., Stanton, P., McGowan, S., Ferlauto. K., & Tilling, M. (2012) Contemporary Issues in Accounting. Sydney: John Wiley. Readings to accompany the lectures Cortese, C. (2013). Politicisation of the international accounting standard setting process: evidence from the extractive industries. Eddie, I (2000) International comparative financial accounting research: A contingency approach. Gaffikin, M. (2010). ‘Being critical in accounting’, International reveiew of business research papers 6(5), 9935-55 Godfrey, J., Hodgeson, A., Tarca, A. Hamilton, J., & Holmheoryes, S., (2010). Measurement Theory. In Accounting theory(Chapter 5. 133-153). Milton, Qld: John Wiley & Sons. Hopewood, A. (2000). Strategy and information: Time to look out. (Downloaded from http://www.obs.ox.ac.uk/sbs/newco6k1.html) Kothari, S.P., Ramanna, K. & D.J. Skinner (2010). ‘Implications for GAAP from an analysis of positive research in accounting’, Journal of Accounting and Economics, 50, pp. 246-86. Kvaal, E. & Nobes, C. (2010), International differences in IFRS policy choice: A research note Accounting and Business Research, 40(2) 173-87 Lyon, D. (1994). The electronic eye: The rise of surveillance society. Macintosh, N.B. (1994). Management accounting and control systems: An organizational and behavioural approach, Mann, G. (1994). The origins of double entry. Australian Accountant, 17-21 Mathews, M.R., & Perera, M.H.B. (1996). The philosophy of science and research methodology. In Accounting theory and development (3rd ed., Chapter 4, pp.38-50). Melbourne: Thomas Nelson. Stott’s Colleges ACC305 Accounting Theory 2017 Semester 1 Page 6 Mathews, M.R., & Perera, M.H.B. (1996). The philosophy of science and research methodology. In Accounting theory and development (3rd ed., Chapter 5, pp.51-76). Melbourne: Thomas Nelson. Miller, P., Hopper, T., & Laughlin, R. (1991). The new accounting history: An introduction. Accounting Organisations and Society, 16(5/6), 395-403. Miller, M.C., & Loftus, J.A. (2000). Measurement entering the 21st century: A clear or blocked road ahead? Australian Accounting Review, 11(2), 4-18. Reslender, r. (1996). Critical accounting and the labour of accountants. Critical Perspectives on Accounting, 7, 461-484. Riahi-Belkaoui, A. (2000). International Accounting. In Accounting theory (4th ed., Chapter 16, pp 479-506). High Holborn, Uk: Thomson Learning Riahi-Belkaoui, A. (2000). International Accounting. In Accounting theory (4th ed., Chapter 16, pp 484-486, 500-501). High Holborn, Uk: Thomson Learning Stewart, R.E. (1992). Pluralizing our past: Foucault in accounting history. Accounting Auditing and Accountability Jouranl, 5(2), 57-73. Wallace, R.S.O., & Gernon, H. (1991). Frameworks for international comparative financial accounting. Journal of Accounting Litereature,10, 209-263. Watts R, & Zimmerman, J (1990) PAT: A ten year perspective. The Accounting Review, 44(2), 273-305. Wickramasinghe, D., & Alawattage, C. (2007). Management accounting change: Approaches and perspectives (Chapter 1, pp.1-24). New York N.Y.: Routledge Journals Charter In The Black The Accounting Review Accounting and Finance Accounting Forum ABACUS Accounting, Organisations and Society Stott’s Colleges ACC305 Accounting Theory 2017 Semester 1 Page 7 Websites www.cpaaustralia.com.au/cps/rde/xchg (The CPA Australia site which includes information about the Society, CPA membership, regulations, professional development and available information resources. CAANZ https://www.charteredaccountantsanz.com/ (The Institute of Chartered Accountants in Australia and New Zealand site which includes information about the Institute, membership, technical issues etc.) www.aasb.com.au Australian Accounting Standards Board, www.taxsites.com Tax and accounting resources, www.fasb.org Financial Accounting Standards Board, www.afaanz.org Accounting and Finance Ass of Australia and NZ, Stott’s Colleges ACC305 Accounting Theory 2017 Semester 1 Page 8 Multiple Choice Tests 20% Due date weeks 2 - 10 Students are required to complete 6 fortnightly quizzes, consisting of 20 multiple choice questions The quizzes will be conducted on Moodle and will be done at the beginning of class in the library in weeks 2, 4, 6, 8, 10, and 12. Each quiz will cover two (2) topics and will be worth 3%. Only the best 5 quizzes contribute to the final grade. Tests will begin promptly at 3:30.00 pm in the College library. Assignment (30%) - Group Assignment Due date: Week 10 (exact date and time TBA) 3000 words Read the following article written by Paul M. Healy and Krishna G. Palepu, the fall of Enron case study by Paul M. Healy and Krishna G and write a report that addresses the following issues: 1. Define and explain mark-to-market accounting approach and give examples where Enron’s management / accountants perhaps misused this approach to portray a rosy picture of its performance / profitability? 2. What are special purpose entities and how Enron’s management used them to fund contracts or achieve financial reporting objectives? 3. Enron’s top management enjoyed high compensation/ remuneration including stock options, what was the main purpose of the stock options compensation scheme provided to top management. Your explanation, discussion and argument should principally be based on the assumption of the agency theory. 4. Have the accountants / auditors involved in the case behaved in accordance to the code of ethics for professional accountants? Explain and discuss the fundamental principles of the code of ethics in relation to the case and provide examples. The assignment must be written in essay form with a clear introduction, a demonstrate critical arguments and draw strong conclusions. While the word allowance is 3,000 words an allowance of no more than 10% either way will be acceptable. All work must be the student’s own work and sources clearly cited within the text according to APA 6th edition referencing style. A reference list must be incorporated at the end of the assignment. Only submissions via Moodle will be accepted and late penalties of 10% per day will be incurred if not submitted on or before the due date. Any forms of plagiarism will result in a fail grade and notification of the plagiarism will be sent to the Academic Dean. Stott’s Colleges ACC305 Accounting Theory 2017 Semester 1 Page 9 Assignment Marking Rubrics: Criteria High Distinction/Distinction Credit Pass Unsatisfactory Marks Explanation of mark-market accounting approach. Factors that might encouraged the use of the mark-to- market approach Student has produced specific examples of the use of mark-to- market by Enron to mislead users of the financial statements Report on the principles of mark-to- market accounting approach and the relevant accounting theory. Student has clearly identified examples and an adequate discussion has been conducted on mark-to- market accounting approach. An attempt has been made but there is a lack of relevance in some areas of mark-market- accounting approach. Most of the examples that might encouraged the use of the mark-to- market approach have been given and some of the benefits of the approach to the company. Student has demonstrated a lack of or little explanation of mark- to-market accounting approach No information provided on factors that might encouraged the company to use mark-to-market accounting approach. /10 Understand what special purpose entities in relation to corporates are. The report shows and in-depth understanding of how the company used special purpose entries to fund contracts and achieve financial reporting objectives. Most relevant factors have been identified with some description of special purpose entities and how the company used them for financial reporting objectives. The discussion addresses most of the issues raised in the task but lacks some clarity There is a lack of evidence to say what are special purpose entries and why the company established them. /9 Depth understanding of the purpose of compensation schemes and the agency theory. The report discussion clearly addresses the purpose of compensations schemes to top management including shares options and the principles of the agency theory assumptions including shareholders and managers relationships. The report outlines the main points relevant to the purpose of the compensation schemes and relevant discussion on shares options including relevant assumptions of the theory. Discussion has been limited to purpose of the compensation schemes to top management team. The argument presented does not support the topic. Little or no attempt has been made to indicate a type of relationship between compensation sachems of top management and the theory. /4 Stott’s Colleges ACC305 Accounting Theory 2017 Semester 1 Page 10 Code of ethics for professional accountants and the fundamental principles of the code of ethics for accountants. The report discussion and explanation clearly addresses the purpose of code of ethics for professional accountants and the fundamental principles of the code of ethics for accountants in relation to the case and student provided clear examples and implications. The report outlines the main points relevant to the purpose of the code of ethics for professional accountants and the fundamental principles of the code of ethics for accountants in relation to the case and student provided examples Discussion has been limited to purpose of the code of ethics for professional accountants. Discussion provided does not support the topic. Little or no attempt has been made to indicate the purpose and the importance of the code of ethics for professional accountants. Academic writing: The answer is easy to understand and follow The report is professionally presented and all grammar and punctuation is correct. The report is professionally presented. The majority of the grammar and punctuation are correct There are some errors in grammar and punctuation. The report is not engaging and/or is not easy to read. A major improvement in the report is needed. There are too many errors in grammar and punctuation. The report style is not easy to read. /4 Referencing: Student has used referencing system clearly and accurately The APA referencing system has been clearly and accurately used and all sources are correctly cited in the report. The APA referencing system has been used clearly and accurately to record all cited sources in the report The APA referencing system has been used to record cited sources in the report but have made some major errors in these citations. The APA system has not been used to record cited sources in the report and/or not all sources are cited and/or no list of references and/or there are serious error in the construction of this list. /3 /30 Stott’s Colleges ACC305 Accounting Theory 2017 Semester 1 Page 11 Examination 50% Due date: Examination period The exam will be a 3 hour closed book with 15 minutes reading time. It will consist of 6 questions and you will be required to answer 5. More information will be given closer to the date. Of note: students must obtain 50% in the examination in order to pass the subject. Participation in the weekly tutorials and reading the suggested articles and sections of the textbook are critical to preparation for the examination. IMPORTANT NOTES ON PASSING THIS SUBJECT Students are advised to acquaint themselves with the academic regulations regarding progress as outlined in the College Rules and Regulations. A deferred or a supplementary examination will be in the mid semester break of the following semester. Supplementary information concerning teaching, learning and assessment may be provided from time to time. Announcement of these matters in classes and on the website shall be deemed to be official notification. It is recommended that students who have life circumstances or personal limitations which may affect their course of study, should contact the Program Coordinator as soon as possible. Group discussion in assignment work is encouraged. However, written reports must be the individual student's work. Any and all collaboration and help received must be clearly acknowledged. Permission to make a late submission of work must be obtained from your Head of Subject/Dean. The reasons for requesting an extension of time must be given in writing and must be received before the due date. Having ‘work in other subjects’ will not be accepted as reasonable grounds for granting an extension. Excuses involving computers or printers will not be accepted as valid reasons for late submission. It is your responsibility to organise projects so that work is submitted by the due date. Where your work is submitted after the due date and compassionate or other grounds cannot be established, there will be a penalty of 10% of the total mark for each day the submission is overdue. In order to pass the subject, you must have satisfactorily completed all assigned work. If the subject lecturer questions any submitted work as wholly or partially plagiarised, you will receive a nil result for the assessment. If the subject lecturer is satisfied that two or more students have engaged in unauthorised collusion, those involved will be subject individually to the same penalties as those applied in individual cases. A duplicate copy of all work submitted must be kept by the student. Assessment grades are as follows High Distinction (HD) 80 - 100 Distinction (D) 70 - 79 Credit (C) 60 - 69 Pass (P) 50 - 59 Resit (R) 40-49 Fail (F) 0 - 39