ACCOUNTING THEORY AND PRACTICE (FAR 600)
Teaching and Learning Arrangements

(SEMESTER: JAN 2007 – APRIL 2007)

COURSE CODE : FAR 600

PROGRAM : BACHELOR OF ACCOUNTING (HONS)
CREDIT HOURS : 4
CONTACT HOURS : 4
STATUS : CORE

SYNOPSIS

This financial accounting course exposes students to accounting theory, corporate accounting policies and financial reporting practices. The importance of history is introduced through a brief discussion on accounting history from both experiences of both western and Muslim Civilization. In understanding the theoretical framework of accounting, the various perspectives on financial accounting theory are examined with particular emphasis on their rationale and implications on accounting practice. General concepts of theory formulation are discussed and types of accounting perspectives and research are also introduced in this course. Corporate Accounting Policies are explained by the development of the Conceptual Framework and the Importance of a Regulatory Environment. The Standard Setting process in Malaysia is discussed. An analytical approach of the accounting standards is adopted by examining the recognition, measurement, disclosure and presentation of accounting information is discussed. Significant emphasis is placed on Asset Measurement, Nature of Liabilities, Types of Equity, Recognition of Revenue and Income Finally contemporary accounting practices and issues are discussed including corporate governance and social and environmental reporting.

LEARNING OBJECTIVES

The primary objective of this course is to develop the critical skills in accounting students of not only understanding what and how accounting practices have been adopted but also why the accounting principles, policies and practices have developed in the professional environment. On completion of the course the student should be able to:

i. Appreciate the importance of accounting history ii. Understand the theoretical framework of accounting and the various perspectives on financial accounting theory. iii. Comprehend the conceptual framework and its use in the adoption of accounting policies in the preparation of annual reports. iv. Critically evaluate accounting standard requirements and its suitability in adopting an applying accounting principles and policies. v. Understand the regulatory process and appreciate the reporting requirements in the preparation of annual reports. vi. Discuss contemporary accounting and reporting issues in the reporting environment.

|TOPICS |DETAILED TOPICS |WEEK |READING |
|PART A: |ACCOUNTING THEORY | | |
|1. Introduction to Accounting|Introduction & Evolution of Accounting Theory |1 |A.,Belkaoui,, chapter 1 |
|Theory |History and development of accounting | |Main text, chapter 1 |
| |Purposes of accounting theory | | |
| | | |Articles on Islamic accounting : |
| |An introduction to the importance of accounting history and the | |Shaari Hamid |
| |development of double entry bookkeeping in the west is discussed.| |Omar A. Zaid |
| |The influence of capitalism in accounting is analyzed and the | |Askary, S and Clarke |
| |accounting practice in Islam is examined. | | |
|2. Theory and Method | |1 |Main Text, Chapter 2(page17 – 28) |
| |Theoretical Framework of Accounting & Accounting Perspectives| | |
| |Range of accounting theories | | |
| |Theory Formulation | | |
| |In understanding the theoretical framework of accounting, the | | |
| |various perspectives on financial accounting theory are examined | | |
| |with particular emphasis on their rationale and implications on | | |
| |accounting practice. General concepts of theory formulation is | | |
| |discussed with special reference to inductive and deductive | | |
| |reasoning. | | |
| |Theory developments from syntactic, semantic and pragmatic | | |
| |arguments are analysed. | | |
|3. Introduction to approaches| |1 |Main text, chapter 3 |
|in the formulation of |Accounting theory construction | | |
|accounting theory |Pragmatic theories | | |
| |Syntactic and Semantic theories | | |
| |Normative theories | | |
| |Positive theories | | |
| |Traditional and contemporary theoretical approaches in accounting| | |
| |are discussed. | | |
| | | | |
| | | | |
|4. Empirical Research in |Positive Accounting Theories | |Main text, chapter 9 (Page 257 – 262) |
|Accounting |Philosophy and scope of positive theory |2 |Main text, chapter 10 |
| |Contracting theory | |(page 299 – 307) |
| |Agency Theory | |Main text, chapter 10 |
| |Political Process | |(page 317 – 318) |
| |Philosophy and scope of positive theory is described and the | |Main text, chapter 10 |
| |distinction between normative and positive theories is examined | |(page 328 – 333) |
| |in understanding its importance in empirical research in | | |
| |accounting. Distinction between contracting theory and agency | | |
| |theory is examined. How positive theory model the political | | |
| |process is discussed. | | |
| | | | |
| |Behavioural Research in Accounting | | |
| |Definition, scope, development and limitations of behavioural | | |
| |research in accounting are described. | | |
| | | | |
| | | | |
| | | |Main text, chapter 11 (page 342 – 344 and |
| | | |360 – 363) |
|PART B |ACCOUNTING REGULATION AND SPECIFIC ISSUES | | |
|5. Financial Reporting |Regulatory framework, uses and users of financial information in | |Tan Liong Tong, Chapter 1. |
|Practice in Malaysia |the Malaysian reporting practice are discussed. |1 |Jane Lazar, Chapter 1 page1-3 |
| | | | |
|6. Standard Setting in |Comparative Study on Standard Setting in political environment in| |Tan Liong Tong, Chapter 1 |
|political environment in |Malaysia, Australia, USA and UK |1 |Main text, Chapter 12 |
|Malaysia, Australia, USA and | | |Foreword to MASB standard and other |
|UK |Development of standard setting in political environment in | |technical pronouncement |
| |Malaysia, Australia, USA and UK is discussed. Due process in | |Mathews and Perera, chapter 7 |
| |formulation of standard is explained. The free market and | | |
| |regulated approach in standard setting in relation to public | | |
| |versus private interest is examined. | | |
|7. Development of Conceptual |The Conceptual Framework: A Review | |Main text, chapter 13 |
|Framework | |1 | |
| |The nature, purpose objectives and critique of conceptual | | |
| |framework are reviewed with reference to Australian and US | | |
| |project. | | |
|8. MASB’s Proposed Conceptual|MASB’s Framework for Presentation and Preparation of Financial | |Jane Lazar, Chapter 1 |
|Framework |statement focusing on the need of Developing Countries is |1 | |
| |discussed. | |MASB’s Framework for Presentation and |
| |(definition, recognition and measurement criteria on the elements| |Preparation of Financial statement |
| |of financial statement to be discussed in a separate | | |
| |topic/lecture | | |
| | | | |
| | | | |
| | | | |
|9. Basis of Measurement in | | |Main text: |
|Accounting |Valuation in Accounting: Its Recognition & Measurement |2 |Chapter 6 (pages 132-142; 149-161) |
| |historical costs | |Chapter 7 |
| |current costs | |(pages 175 – 180; 189-192) |
| |exit price | |Chapter 8 |
| | | |(pages 225-240) |
| |An Evaluation of Cost concepts, which include historical costs, | | |
| |current costs and exit price is done with a view to examine its | | |
| |implications on asset valuation and income determination | | |
| |(supports and criticisms). The distinction between physical and | | |
| |financial capital is discussed. | | |
|10. Elements in Financial |Brief explanation on definition, recognition and measurement of: |1 |Main text: |
|Statement |Assets | |Chapter 14 |
| |Liabilities | |(pages 449 - 471) |
| |Owners’ Equity | |Chapter 15 |
| |Income | |(pages 485 – 492) |
| |Expense | |Chapter 16 |
| | | |(pages 514 – 516) |
| |The MASB’s definition, recognition and measurement criteria are | |Chapter 17 |
| |discussed using relevant explanations and illustrations from | |(page 563 - 564) |
| |designated chapters in the main text. The distinction between | |Chapter 18 |
| |accounting and business income is evaluated. The importance of | |(page 599 – 616) |
| |the matching concept is explained | | |
|PART C |CONTEMPORARY ISSUES | | |
|11. Corporate Governance |Corporate Governance and Financial Reporting Practice |1 |Relevant journal articles |
| |Issues surrounding importance, development and objectives of | | |
| |corporate governance are discussed. The Malaysian Corporate | | |
| |Governance with the setting up of Malaysian Institute of | | |
| |Corporate Governance is reviewed. The role of Audit Committee and| | |
| |its implementation is analyzed | | |
|12 VOLUNTARY DISCLOSURE | |1 | |
|Social and environmental |Social and environmental Reporting | | |
|Reporting |Social and environmental reporting issues are analysed. A | |Main text, chapter 19 |
| |theoretical model that outlines the development of corporate | |(page 631 – 640; 649-650) |
| |concern for social and environmental issues is discussed | | |
|Segmental Reporting |Segment Reporting | | |
| |Segmental Reporting FRS 114 is discussed in detail pertaining to | | |
| |recognition and disclosure of the segment assets, revenue and | |Jane Lazar, Chapter 15 |
| |income. | |FRS 114 |

MAIN TEXT
Godfrey Jayne, Alan Hodgson and Scott Holmes, Accounting Theory, 6TH Edition, John Wiley and Sons, 2006.

REFERENCES

1. Belkoui, Ahmed, Accounting Theory, 4th Edition: Business Press 2000.

2. Kam, Vernon, Accounting Theory, 2nd Edition, John Wiley and Sons, 1990.

3. Mathews, M R and M H B Perera, Accounting Theory and Development, Thomas Nelson, 3rd Edition 1996

4. Schroeder, Richard G. and Myrtle Clark.1995 (eds). Accounting Theory: Text and Readings. Fifth Edition. John Wiley & Sons.

5. Scott, William R., Financial Accounting Theory, International Edition, Prentice Hall, 1997.

6. Hendriksen, Eldon S. and Michael F. Van Breda . 1992. Accounting Theory. Fifth Edition. Boston. Irwin.

7. Tong, Tan Liong. 1997. Financial Accounting & Reporting in Malaysia. MACPA. Thomson Information.

8. Zeff, Stephen A. and Bala G. Dharan (eds). 1994. Readings and Notes on Financial Accounting: Issues and Controversies. Fourth Edition. McGraw-Hill International Editions

9. Jane Lazar, Huang Ching Choo and Roshayani Arshad, Financial Reporting StandardsMcGraw Hill,2006.

Professional Materials:
Malaysian Institute of Accountants Members Handbook Vol I
MASB pronouncements
Other professional bodies pronouncements
Journals: Accountants’ today (MIA) The Malaysian Accountant (MACPA) The Certified Accountant (CACA) Accountancy (ICAEW) Management Accounting (CIMA) The Australian Accountant (ASA) International Journal of Accounting Accounting Review Abacus Journal of Accounting Research Journal of Accounting and Business Research

ASSESSMENT

1. Continuous Assessment (40%) • Group project and presentation 15% • Individual Essay 10% • Test 15 %

2. Final examination (60%)
GROUP PROJECT

Aim of group project

To give the students an opportunity to discover extant reporting practice with regard to compliance to accounting standards and voluntary disclosures through their observation and analysis of the actual practice of reporting.

Description The project presentation and report consists of a critical analysis of published annual report of 10 Malaysian listed companies (year ending 2000 onwards) in the form of their extent of compliance to specific MASB standard listed below. Students are also required to analyse the level of voluntary disclosures in the annual report.

The standard is regarded as part of course content in the final examination.

FRS 110 Events After the Balance Sheet Date

Format and grading of report (10%) and presentation (5%)

The report must be presented as follows:

- maximum of 20 pages excluding appendices - font size 11 and 1 ½ spacing

Format and grading of the report is suggested as follows:-

Introduction/Literature review/Methodology 3 Analysis 4 Recommendation/conclusion 1 Presentation/layout 2 10

*Power point Presentation 5 Total 15 ===

*Presentation (5%) The presentation should be of a high standard and will be assessed according to the following criteria • Depth of research • Relevance and interest • Quality of verbal presentation • Clarity of expression of ideas • Ability to involve class • Physical appearance

INDIVIDUAL ESSAY (10 %)

Each student is required to select a topical issue in financial reporting such as below from professional journals and write a critical essay of not more than 1000 words. The essay will be evaluated in terms of the student ability to grasp the concepts and issues raised in the topical discussion. Original articles used as references must be enclosed in the appendix of the essay. • Conventional and Islamic accounting ; ethical issues in financial reporting • Fair value accounting vs historical cost accounting • The role of accountants in achieving sustainability • Sarbanes-Oxley (SArOx) can be considered as a move to protect accountants rather than burden them with more compliance which ultimately seeks to maintain the integrity of the profession. Discuss. • Accountants as financial gatekeepers also need to be tech-savvy. Discuss.

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, presenting work as your own requires that the work is your own original work and that every member of the group is expected to make a material contribution to the group work.