International Undergraduate Program in Accounting

Faculty of Economics and Business, University of Brawijaya

1. Subject : Accounting Theory

2. Course Code : AEC 1207
3. Credit points :3

1. Course Description

This course discusses concepts and accounting theory formulation which covers concepts of
financial accounting theory, accounting theory formulation, structure of accounting theory,
and accounting standard setting.

2. Course Objective

After completing this course, students are expected to have understanding about accounting
theory and the process of its formulation and also understand the basics of financial
accounting theory.
The breakdown of the course objective is as follows:
1. To give understanding of financial accounting theories and their formulations.
2. To understand the approaches in formulating accounting theory
3. To understand why and how accounting research is needed
4. To understand issues chosen in accounting theory

3. Course Competency

After learning all material given in this course, students are expected to be able to understand
and explain:
1. Financial Accounting theories and their formulation
2. Approaches in formulating accounting theory
3. Why and how accounting research is needed
4. Chosen issues in accounting theory

4. Learning Method

The method used is as follows:

1. lecture
2. Class Discussion
 5. Scoring System

The scoring system consists of these points:

1. Class Participation (15%)
2. Assignments (15%)
3. Quiz (20%)
4. Mid term test (25%)
5. Final Exam (25%)

6. References

Books:
1. American Accounting Association, 1977, A Statement of Basic Accounting Theory
(ASOBAT) (ASO)
2. Financial Accounting Standard Boards, SFAC # 1,2,3,5,6,7, and 8
3. Belkoui, Ahmed R., 2000, Accounting Theory, Business Press (BEL)
4. Deegan, C., 2004, Financial Accounting Theory. McGraw-Hill, Australia (DEG)
5. Gaffikin, M., 2008, Accounting Theory Research, Regulation and Accounting Practice,
An Imprint of Pearson Education Australia (GAF)
6. Scott, William R., 2009, Financial Accounting Theory, Prentice-Hall International
Toronto, Canada (SCT)
7. Watt, R.L. dan J.L. Zimmerman, 1986, Positive Accounting Theory, Prentice-Hall
International, Inc, Englewood Cliffs, NJ, USA (WTZ)
8. Wolk, Tearney, dan Dodd, 2001, The Accounting Theory A Conceptual and Institutional
Approach, Fifth Edition, South-Western Publishing Company (WTD)
9. Articles of scientific accounting journals which will be determined latetr in the class..

Articles (several);
1. Watts and Zimmerman. 1979. The demand for and supply of accounting thoeries: The
market for excuses. The Accounting Review. LIV, 2: 273-305.
2. Watts and Zimmerman. 1978. Towards a positive accounting theory of the determination
of accounting standards. The Accounting Review, 53, 1: 112-134
3. Healy, P.M., and Palepu. K. G. 2001. Information Asymmetry, Corporate Disclosure, and
the Capital Markets: A Review of the Empirical Disclosure Literature. Journal of
Accounting and Economics 31 (1-3): 405-440.
4. Ball, R. and Brown, P. 1968. An empirical evaluation of accounting income numbers.
Journal of Accounting Research 6 (2): 159177.
5. Collins, D., Maydew, E. and Weiss, I. 1997. Changes in the value-relevance of earnings
and book values over the past forty years. Journal of Accounting and Economics 24 (1):
39-67
6. Other articles will be determined later.
 7. Topic and Reference used

Session Topic Sub Topic Ref.

1 Explanation on
Accounting Theory
2 SFAC No. 1,2,5,6,7,8
3 Financial Accounting
Theory
4 Decision usefulness
approach on the
financial report
5 Efficient securities
market
1. Understand accounting theory Syllabi and
learning material Overview
2. Understand in general the
teaching model of accounting
theory
1. Understand the purpose of Financial
financial report of business Accounting
company Standard Board
SFAC 1,2,5,6,7, and
2. Understand qualitative
8
characteristic of financial
report
3. Understand measurement and
recognition
4. Understand elements of
financial report
5. Understand cash flow report
6. Understand the changes of
cost-based concept to market-
based concept
1. Understand complexity of Scott Ch. 1
information in financial
accounting and report
2. Understand the role of
accounting research
3. Understand fundamental
problems of financial
accounting theory
1. Understand decision Scott Ch. 3
usefulness approach
2. Understand single person
decision theory
3. Understand portfolio theory
4. Understand optimum decision
theory
1. Understand efficient Scott Ch. 4
securities market
2. Understand implications of
efficient securities market
3. Understand the significant of
securities market
6 Information perspectives 1. Understand the benefit of Scott Ch. 5
on the useful decision information in making
decision
2. Understand general problems
of accounting research and
finance.
3. Understand coefficient
respond profit in the study of
Ball and Brown
7 Measurement 1. Understand efficient market Scott Ch. 6
perspectives on the 2. Understand logic that
useful decision supports measurement
perspectives
3. Understand the relevancy of
financial report information
value
8 Mid term Test

9 Economic consequences 1. Understand the existence of Scott Ch. 8

and positive accounting economic consequences
theory 2. Understand positive
accounting theory in general
10 Agency theory and 1. Understand agency theory and Scott Ch. 9
conflict analysis its implication toward
accounting
2. Understand game theory
3. Agency theory implications
on Accounting
11 Earnings management 1. Understand the pattern of Scott Ch. 11
earnings management
2. Understand the positive side
of earnings management
3. Understand the negative side
of earnings management
12 Accounting Standard 1. Understand regulation theory Scott Ch. 12
Arrangement from from economics activities
economics issues 2. Understand private support to
create information
13 Accounting Standard 1. Understand regulation theory Scott Ch. 13
Arrangement from 2. understand IAS and IFRS
political issues 3. understand relation of
regulation theory, conflict and
compromise
14 Accounting 1. understand corporate theory Gaffikin Ch. 8
environment, ethics and 2. understand accounting and its
culture environment
15 Special Topics of 1. understand theory and Special material
Accounting theory accounting in the future from the lecturer
2. understand recent issues in
accounting
 3. additional material which will
be determined later
16 Final Examination