INSTRUCTOR: Dr. Hamid Pourjalali Professor of Accounting

INSTRUCTOR: Dr. Hamid Pourjalali Professor of Accounting

Accounting 616

Accounting Theory & Development

Fall 2015

Tuesdays 6:00 pm- 8:45 pm- D201

INSTRUCTOR: Dr. Hamid Pourjalali Professor of Accounting


PHONE: Work: 956-5578


OFFICE HOURS: 4:00 – 5:00 Tuesdays

Note: The following syllabus is tentative and subject to change.

Course Description and Objectives:

Course Description: History and theoretical background of accounting standards. Including accounting theories; normative and positive theories. Literature supportive and critical of accounting theories and standards.

Prerequisites: Accounting 323. Instructor does not allow students without Acc 323 to enroll in this class. Students without necessary prerequisite will be dropped from the class in the third week of the class.

Textbooks:Required: 1) Financial Accounting Theory (2015) by William Scott (Pearson-Prentice Hall).

Suggested: More Than A Number Game, A Brief History of Accounting, by Thomas A. King, Published by John Wiley and Sons, Inc. 2006, ISBN 0-470-00873-3)

Other sources: I may assign other reading materials. In such cases, you will be notified of the reading assignment at least a week before the class period.


2 Exams @ 30 percent 60percent

Cases, Exercises, Essays (not counted towards exams) 30percent

Class participations (including in-class quizzes) 10 percent


Exams: The exams are non-comprehensive. They may be administered throughout the semester or at the time assigned in the syllabus.

Cases, Exercises, Essays, and Class Participation: When and if assigned, cases, exercises, or essays are assigned a week ahead of the class period they are due. You are to write up your analysis/answers and turn them in at the beginning of class period for which the assignment(s) are due. These solution and answer to assignments must be typed and you must make sure that your papers are properly written and are edited for grammatical errors. You may include appendixes for your answers to cases and essays, but your main document (excluding the appendixes) for each assignment should not be more than 500 words (in some cases that the problem requires multiple answers, 700 words responses will be acceptable). Class participation is vital to the success of this course. 10% of the total grade for this class is allocated to your participation in the discussion in the class. I may call on you in class, so be sure that you are adequately prepared. You may skip one of the class periods without penalty; however group assignments cannot be skipped. The quality of your comments is more important than the quantity.

Class participation points are based on both class behavior and classroom performance. Students with unprofessional behaviors will get a “0” in class participation points. Unprofessional behaviors include, but are not limited to sleeping, chatting, and text messaging during the class. I reserve the right to make further deductions of the student’s final grade for these unprofessional behaviors.

All students are expected to read assigned chapters.

Class assignment

Every session (but the first session), students will randomly be assigned to groups of 3 or 4 members. Each group may also be issued a video recorder. After the lecture and discussion in class is completed, class will receive an assignment. The assignment will need to be completed by each group. The recorder is to be used to record members’ discussion. The answer for the assignment will need to be typed and reported to me no later than 9:00 p.m. in the evening when assignment is given. All video recorders will also need to be returned by day following the lecture.

This new approach, a successful method in Oklahoma State University, is designed with the following objectives in mind:

1) As the question(s) for the evening is only revealed after the class lecture and discussion is concluded, students are more involved in the class and make sure that they take appropriate notes and contribute to class discussions.

2) Learning process is more effective, because students find it necessary to read the reading assignment in advance to be prepared to answer questions.

3) Given that the discussion is videotaped, it is hoped that the problem of free-riders is addressed

If this method is used, depending on its success, some of the assignment maybe considered as part of the mid-term and final exam.


I use pluses and minuses in grading. Although A+ will not make any difference (from A) in your GPA, I will assign A+ to those earn over 98% of total possible grades. The following scale will be used:

98% - 100% = A+
94% - 97% = A
90%- 93% = A-
87% - 89 % = B+
83% - 86% = B
80% - 82% = B- / 77% - 79 % = C+
73% - 76% = C
70% - 72% = C-
67% - 69 % = D+
63% - 66% = D
60% - 62% = D-
Below 60% F

A Note on Attendance: You are expected to attend every class. Your semester grade, based on the above, will be lowered if there is more than one absence.

Withdrawal/Drop Policy: The student has the responsibility to withdraw from the course (see above for dates). If a student stops attending class and does not drop the course, a grade of "F" will be assigned at the end of the semester.

Presentation: throughout the semester, I will assign you to groups. You are to work with your group and read and maybe required to present the assigned material. Groups may find it appropriate to include some additional information obtained from sources other than the assigned reading material (I strongly encourage this). All members of the group must equally contribute to the group work. Groups may be assigned for presentations in which case, they need provide me with a copy of their PowerPoint presentation. When asked, I strongly encourage you to make a very professional presentation and practice your presentation (at least once) before you actually do it in the classroom.

Communication: I strongly encourage students to come to my office hours or make appointments. Email is a preferred communication method. I will not discuss grades through email.


All University of Hawaii and Shidler College of Business rules and policies will be followed in the course.

Alternate Meeting Place: In the event of any disturbance requiring the evacuation of Shidler College, you are to meet the instructor in the grassy area on the south (makai) side of George Hall. At that time, further instructions will be given (if an exam is in progress, you will be notified of an alternate room to complete the exam).

Students with Disabilities: Any student who has a documented disability and requires accommodations is strongly encouraged to contact me or the KOKUA Program located in Room 13 on the first floor of the Student Services Center (also contact Ann Ito, KOKUA Program Director at 956-7511).

Academic Honesty: Students are expected to behave with integrity in all academic endeavors. Cheating, plagiarism, as well as any other form of academic dishonesty, will not be tolerated. All incidents will be handled in accordance with the UH Student Code of Conduct. The UH Student Code of Conduct, is available at: Please become very familiar with the University Student Conduct Code so you can make conscience and informed choices about your behavior. Some relevant portions of the code are included below for your convenience.

Acts of dishonesty, types of behavior that conflict with the community standards that the UH values and expects of students, include but are not limited to the following:

  • cheating, plagiarism, and other forms of academic dishonesty,
  • furnishing false information to any UH official, faculty member, or office,
  • forgery, alteration, or misuse of any UH document, record, or form of identification.

The term "cheating" includes, but is not limited to: (1) use of any unauthorized assistance in taking quizzes, tests, or examinations; (2) use of sources beyond those authorized by the instructor in writing papers, preparing reports, solving problems, or carrying out other assignments; (3) the acquisition, without permission, of tests or other academic material belonging to a member of the UH faculty, staff or student (4) engaging in any behavior specifically prohibited by a faculty member in the course syllabus or class discussion.
The term "plagiarism" includes, but is not limited to, the use, by paraphrase or direct quotation, of the published or unpublished work of another person without full and clear acknowledgement. It also includes the unacknowledged use of materials prepared by another person or agency engaged in the selling of term papers or other academic materials.

In addition to the above, the instructor specifically prohibits the following behaviors, and includes them within the definition of academic dishonesty: (1) providing another student with any form of direct or indirect, unauthorized assistance on any assignment, quiz, test or exam; and (2) copying, or recording in any manner, test or exam questions or answers.

Please NOTE: UH disciplinary proceedings may be instituted against a student charged with conduct that potentially violates both the criminal law and this Student Conduct Code (that is, if both possible violations result from the same factual situation) without regard to the pendency of civil or criminal litigation in court or criminal arrest and prosecution.

If a student is caught committing an act of Academic Dishonesty, as defined in the University Student Conduct Code, they will receive a grade of “F” for the course and be referred for disciplinary action as provided for by the University Student Conduct Code.

Classroom Behavior: Both students and faculty have responsibility for maintaining an appropriate learning environment. Students who fail to adhere to behavioral standards may be subject to discipline. Faculty must treat students with understanding, dignity and respect, to guide classroom discussion and to set reasonable limits on the manner in which students express opinions.

Cell Phones and Laptops: Cell phones should be turned off or put in silent mode for every class (myself included). Laptops may be used to take notes and view the course/textbook webpages and links, but during class, should not be used for other purposes. Violation of this policy will result in a lowered class participation score and potential expulsion from class.


I have attached an outline of the topics that will be covered in this class. The schedule also indicates the date for the midterm and final exam.

Date /



Reading Assignment

8/25 /
  • Course introduction/Syllabus
  • Some historical perspective
  • Chapter 1,
  • Basu, Kirk and Waymire (2009)

9/01 /
  • Accounting under ideal conditions
  • Chapters 1 and 2

9/08 /
  • The Decision Usefulness approach to financial reporting
  • Chapter 3

9/15 /
  • Efficient Securities Markets
  • Implications of Efficient Securities Markets for Financial Reporting
  • The Informativeness of Price
  • CAPM
  • Information asymmetry
  • Full disclosure
  • Chapter 4

9/22 /
  • Is accounting information useful for decision making?
  • Is accounting information value-relevant?
  • Earnings response coefficients (ERC)
  • Chapter 5
  • Ball and Brown (1968), JAR

9/29 /
  • The value relevance of financial statement information
  • Chapter 6
  • Collins, Maydew, and Weiss (1997), JAE

10/06 /
  • Fair value accounting
  • Trading based on financial statement information – Fundamental analysis
  • What are powerful predictors of future earnings and future stock price?
  • Chapter 7
  • Landsman and Maydew (2002), JAR

10/13 /
  • The measurement approach to decision usefulness
  • Chapter 8
  • Song, Thomas, and Yi (2010), TAR

10/20 /
  • Economic Consequences and Positive Accounting Theory.
  • An Analysis of Conflict.
  • Understanding Agency Theory and Game Theory
  • Chapter 9
  • Han and Wang (1998), TAR

10/27 /
  • Mid-term exam

11/03 /
  • Executive compensation
  • Chapter 10
  • Healy (1985), JAE

11/10 /
  • Earnings management
  • Earnings quality (or Accounting quality)
  • Chapter 11
  • Leuz, Nanda, and Wysocki (2003), JFE

11/17 /
  • Earnings management
  • Earnings quality (or Accounting quality)
  • Chaper 11
  • Francis, LaFond, Olsson, and Schipper (2004), TAR

11/24 /
  • Disclosure
Corporate governance (e.g., audit committee)
  • Some other issues
  • Chapter 12
  • Sengupta (1998), TAR

12/01 /
  • Benefits of adopting high-quality accounting – investment efficiency
  • Chapter 13
  • Klein (2002), JAE

12/08 /

Assigned Research Papers

(1) Ball R. and P. Brown, 1968. “An empirical evaluation of accounting income numbers,” Journal of Accounting Research (Autumn) 159 – 178.

(2) Basu, S, M. Kirk, and G. Waymire, “Memory, transaction records, and The Wealth of Nations,” Accounting, Organizations and Society, Vol. 34 No. 8, November 2009, 895-917.

(3) Collins, D.W., E.L. Maydew, I.S. Weiss, 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.

(4) Francis, LaFond, Olsson, and Schipper, 2004. “Costs of equity and earnings attributes,” The Accounting Review 79(October): 967-1010.

(5) Han, J., S.W. Wang, 1998. “Political costs and earnings management of oil companies during the 1990 Persian Gulf Crisis,” The Accounting Review.

(6) Healy, P., 1985. “The effect of bonus schemes on accounting decisions,” Journal of Accounting and Economics.

(7) Klien, A, 2002. “Audit committee, board of director characteristics and earnings management,” Journal of Accounting and Economics 33: 375-400.

(8) Landsman, W. and E.L. Maydew, 2002. “Has the information content of quarterly earnings announcements declined in the past three decades?” Journal of Accounting Research (June) 797-808.

(9) Leuz, C., D. Nanda, and P. D. Wysocki. 2003. Earnings management and investor protection: An international comparison. Journal of Financial Economics 69 (3): 505–27.

(10) Sengupta, P., 1998. “Corporate disclosure quality and the cost of debt,” The Accounting Review (October): 459-474.

(11) Song, C.J., W. Thomas, H. Yi, 2010. “Value relevance of FAS No. 157 fair value hierarchy information and the impact of corporate governance mechanism2,” The Accounting Review 85 (4): 1375-1410.