Financial Accounting Theory

Craig Deegan

Chapter 1
Introduction to financial accounting theory
Slides written by Craig Deegan and Michaela
Rankin

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PPTs t/a Financial Accounting Theory 2e by Deegan 1-1
Learning objectives
In this chapter you will be provided with evidence
that shows that
there are many theories of financial accounting
the different theories of financial accounting are often
developed to perform different functions, such as to
describe accounting practice or prescribe particular
accounting practices

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PPTs t/a Financial Accounting Theory 2e by Deegan 1-2
Learning objectives (cont.)
theories, including theories of accounting, are developed
as a result of applying various value judgements and that
acceptance of one theory, in preference to others, will in
part be tied to ones own value judgements
we should critically evaluate theories before accepting
them

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PPTs t/a Financial Accounting Theory 2e by Deegan 1-3
What is a theory?
A coherent set of hypothetical, conceptual and
pragmatic principles forming the general
framework of reference for a field of inquiry
(Hendriksen 1970, p. 1)
Based on logical (coherent) reasoning, and not ad
hoc in nature

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Accounting theories
Accounting is a human activity
It would seem illogical to study financial accounting
(for example, the accounting standards) without
also studying accounting theory
Theories of accounting consider
peoples behaviour with respect to accounting information
peoples needs for accounting information
why people within organisations elect to supply particular
information

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PPTs t/a Financial Accounting Theory 2e by Deegan 1-5
Examples of uses of accounting theories
Theories might
prescribe how assets should be valued
predict why managers will choose particular accounting
methods
explain how an individuals cultural background affects
accounting information provided
prescribe what accounting information should be
provided to particular classes of stakeholders
predict that the relative power of a stakeholder group will
affect the accounting information it receives

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PPTs t/a Financial Accounting Theory 2e by Deegan 1-6
Overview of theories of accounting
Many theories of financial accounting exist
No universally accepted theory of accounting
different perspectives about the central objective, role
and scope of financial accounting
No universally accepted perspective about the role
of accounting theory
different researchers have different perspectives of the
role of accounting theory
a researchers own values will influence which theory he
or she elects to embrace

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PPTs t/a Financial Accounting Theory 2e by Deegan 1-7
Early development of accounting theory
Relied upon the process of induction
development of ideas or theories through observation

Diandalkan proses induksi

pengembangan ide-ide atau teori-teori melalui
1920s to 1960s theories developed from observing
what accountants did in practice
codified as doctrines or conventions of accounting 1920
ke tahun 1960-an teori yang dikembangkan dari
mengamati apa akuntan lakukan dalam praktek
dikodifikasikan sebagai doktrin atau konvensi akuntansi

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Criticisms of inductive method
concentrates on the status quo, is reactionary in attitude and cannot
provide a basis upon which current practice may be evaluated or from which
future improvements may be deduced (Gray, Owen & Maunders 1987, p.
66)
Assumes what is done by the majority is the most appropriate practice
Peberkonsentrasi pada status quo, adalah reaksioner dalam sikap dan tidak
dapat memberikan dasar yang di atasnya praktek saat ini dapat dievaluasi
atau dari mana perbaikan masa depan dapat disimpulkan(Gray, Owen &
Maunders 1987, hal. 66)
Mengasumsikan apa yang dilakukan oleh mayoritas adalah praktek yang
paling tepat
Perspektif Darwinisme akuntansirspective of accounting Darwinism

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Example of inductive approach to theory development Contoh
pendekatan induktif untuk pengembangan teori

Grady (1965) undertook research commissioned by the American Institute of

Certified Public Accountants (AICPA)
Formed the basis of APB Statement No. 4 Basic Concepts and Accounting
Principles Underlying the Financial Statements of Business Enterprises
reflected generally accepted accounting principles at the time
Grady (1965) melakukan penelitian ditugaskan oleh American Institute of
Certified Public Accountants (AICPA)
Membentuk dasar dari APB Statement No. 4 Konsep Dasar dan Prinsip
Akuntansi Mendasari Laporan Keuangan Usaha Bisnis
tercermin prinsip akuntansi yang berlaku umum pada saat itu......

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Theory development1960s and 1970s
pengembangan teori
Sought to prescribe particular accounting practices
known as normative theories
Not driven by existing practices, and hence not typically inductive in nature (that is, not
based on observation)
Rather, were deductive in nature and, based on logical argument, sought to develop
new methods of accounting
Theories critical of historical cost accounting
Sought to provide improved approaches to asset valuation in a time of widespread
inflatio
Berusaha untuk meresepkan praktik akuntansi tertentu
dikenal sebagai teori normatif
Tidak didorong oleh praktek-praktek yang ada, dan karenanya tidak biasanya induktif di
alam (yaitu, tidak berdasarkan pengamatan)
Sebaliknya, yang deduktif di alam dan, berdasarkan argumen yang logis, berusaha
mengembangkan metode baru akuntansi
Teori kritis akuntansi biaya historis
Berusaha untuk memberikan pendekatan ditingkatkan untuk penilaian aset dalam
waktu inflasi luas

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Example of prescriptive theory contoh
teori perspektif
1961 and 1962 studies by Moonitz, and Sprouse and Moonitz commissioned
by the Accounting Research Division of the AICPA
Authors proposed that accounting measurement systems be changed from
historical cost to a system based on current values
Such research should not be evaluated by reviewing current practice
Not s
1961 dan 1962 studi oleh Moonitz, dan Sprouse dan Moonitz ditugaskan
oleh Akuntansi Penelitian Divisi AICPA
Penulis mengusulkan bahwa sistem pengukuran akuntansi berubah dari
biaya historis untuk sistem yang didasarkan pada nilai-nilai saat ini
penelitian tersebut tidak harus dievaluasi dengan mengkaji praktek saat ini
Tidak didukung oleh AICPA sebagai terlalu berbeda dari praktek saat
inupported by AICPA as too radically different from current practice

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Teori perkembangan-pertengahan hingga
akhir 1970-an
teori perkembangan pertengahan
Research aimed at explaining and predicting
accounting practice rather than prescribing
particular practices
Known as positive theories
Teori perkembangan-pertengahan hingga akhir 1970-an
mengapa hal itu tidak tepat untuk menolak teori normatif akuntansi karena
resep yang tidak dapat dikonfirmasi melalui obseration empiris

Penelitian bertujuan untuk menjelaskan dan memprediksi praktik akuntansi

daripada meresepkan praktek tertentu
Dikenal sebagai teori positif
teori normatif akuntansi belum tentu didasarkan pada pengamatan dan
karena itu tidak bisa (atau tidak harus) dievaluasi pada apakah mereka
mencerminkan praktik akuntansi yang sebenarnya.

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Positive theories
Seek to predict and explain particular phenomena
Begins with assumption(s), and through logical deduction enables prediction(s) to be
made
If predictions are sufficiently accurate when tested against observations of reality, they
are regarded as having provided explanation of why things are as they are

Berusahalah untuk memprediksi dan menjelaskan fenomena tertentu

Dimulai dengan asumsi (s), dan melalui deduksi logis memungkinkan prediksi (s) yang
akan dibuat
Jika prediksi cukup akurat ketika diuji terhadap pengamatan realitas, mereka dianggap
telah memberikan penjelasan mengapa hal-hal yang seperti mereka

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PPTs t/a Financial Accounting Theory 2e by Deegan 1-14
Positive theories (cont.)
Positive Accounting Theory
developed by Watts and Zimmerman
seeks to predict and explain why accountants elect to adopt particular accounting
methods in preference to others
based on rational economic person assumption
individuals motivated by self-interest tied to wealth maximisation

Teori Akuntansi Positif
dikembangkan oleh Watts dan Zimmerman
berusaha untuk memprediksi dan menjelaskan mengapa akuntan memilih
untuk mengadopsi metode akuntansi tertentu dalam preferensi untuk orang
lain
didasarkan pada asumsi orang ekonomi rasional
individu termotivasi oleh kepentingan terkait dengan maksimalisasi kekayaan

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Normative theories
Based on what the researcher believes should occur in particular
circumstances
not based on observation
Example of normative theory
Continuously Contemporary Accounting (CoCoA) by Raymond
Chambers
Should not be evaluated on whether they reflect actual accounting practice

Berdasarkan apa yang peneliti percaya harus terjadi dalam keadaan tertentu
tidak berdasarkan pengamatan
Contoh teori normatif
Terus Kontemporer Akuntansi (kakao) oleh Raymond Chambers
Tidak harus dievaluasi pada apakah mereka mencerminkan praktik
akuntansi yang

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Classifications of normative theories
True income theories
make assumptions about the role of accounting then seek
to provide a single best measure of profits
Decision usefulness theories
ascribe a particular type of information for particular
classes of users on the basis of assumed decision-
making neteori pendapatan yang benar
membuat asumsi tentang peran akuntansi kemudian
berusaha untuk memberikan satu terbaik ukuran
keuntungan
teori keputusan kegunaan
menganggap jenis tertentu dari informasi untuk kelas
tertentu pengguna atas dasar diasumsikan kebutuhan
pengambilan keputusaeds
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Decision usefulness theoriesteori
keputusan kegunaan
Decision-makers emphasis
undertaking research that seeks to ask decision makers what
information they want
knowledge then used to make prescriptions about what information
should be supplied
Decision-models emphasis
develops models based on the researchers perceptions
abouPengambil keputusan penekanan
Penelitian usaha yang berupaya untuk meminta pengambil keputusan
informasi apa yang mereka inginkan
pengetahuan kemudian digunakan untuk membuat resep tentang apa
informasi harus disediakan
Keputusan-model penekanan
mengembangkan model berdasarkan persepsi para peneliti tentang apa
yang diperlukan untuk pengambilan keputusan yang efisient what is
necessary for efficient decision making

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Evaluating theories of accounting
Students should consider the merit of the argument and the research
methods employed
Some researchers may adopt strategies (such as overt condemnation of
alternative theories) to support their own research and theoretical
perspective

Siswa harus mempertimbangkan kebaikan argumen dan metode penelitian

yang digunakan
Beberapa peneliti dapat mengadopsi strategi (seperti kecaman yang jelas
dari teori-teori alternatif) untuk mendukung penelitian mereka sendiri dan
perspektif teoritis

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Revolutionary scientific progress (Kuhn) Kemajuan ilmu pemgetahuan
alam revolusioner

Knowledge advances when one theory is replaced by another as particular researchers

attack the credibility of an existing paradigm and advance an alternative
a paradigm can be defined as an approach to knowledge advancement that
adopts particular theoretical assumptions, research goals and research methods
(Kuhn 1962).
Possible explanation of why researchers try to denigrate the credibility of alternative
theories
but no accounting theory has to date overthrown all other alternatives

Pengetahuan kemajuan ketika salah satu teori digantikan oleh yang lain sebagai
peneliti khususnya menyerang kredibilitas paradigma yang ada dan memajukan
alternatif
paradigma dapat didefinisikan sebagai sebuah pendekatan untuk kemajuan
pengetahuan yang mengadopsi asumsi teoritis tertentu, tujuan penelitian dan metode
penelitian (Kuhn 1962).
penjelasan yang mungkin mengapa peneliti mencoba untuk merendahkan kredibilitas
teori alternatif
tetapi tidak ada teori akuntansi telah sampai saat digulingkan semua alternatif lainnya

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Criticism of positive theoriesan example

41/5000
Kritik positif teori-contoh

Positive theories of accounting have been criticised for not providing prescription
The decision not to provide prescription could alienate academic accountants from their
co
TerjemahanMatikan terjemahan instan
207/5000
teori positif akuntansi telah dikritik karena tidak memberikan resep
Keputusan untuk tidak memberikan resep bisa mengasingkan akuntan akademis dari
rekan-rekan mereka dalam profesi
unterparts within the profession

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Criticism of normative theoriesan
example
Normative theories have been criticised for lack of
empirical observation
based on personal opinion about what should happen
positive theorists argue that they would prefer to provide
information about expected implications of actions and let
others decide themselves what they should do
positive theorists also make value judgements

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Evaluation of theoriesthe position taken
in this book
Theories of accounting are only abstractions of
reality
The choice of one theory in preference to another
is based on value judgements
Cannot expect to provide perfect explanations or
predictions of human behaviour or assess what
types on information users actually need

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PPTs t/a Financial Accounting Theory 2e by Deegan 1-23
Evaluating theorieslogic and evidence
When evaluating theories, need to consider
whether the argument supporting the theory is logical
whether you agree with the central assumptions of the
theory
whether you accept any supporting evidence provided

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PPTs t/a Financial Accounting Theory 2e by Deegan 1-24
Logical deduction
Acceptance of an argument must be based on the accuracy of the premises
an argument is logical to the extent that if the premises on which it is
based are true, then the conclusion will be true
We do not need to refer to real world observations t
Penerimaan argumen harus didasarkan pada keakuratan tempat
argumen logis sejauh bahwa jika tempat yang didasarkan adalah benar,
maka kesimpulannya akan menjadi kenyataan
Kita tidak perlu untuk merujuk pada pengamatan dunia nyata untuk
menentukan logika argumeno determine the logic of an argument

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The role of assumptions
Even though an argument is logical we might only
accept the argument if we accept any critical
assumptions being made
if we reject any central assumptions we may reject the
prediction
Meskipun argumen logis kita mungkin hanya menerima
argumen jika kita menerima asumsi kritis yang dibuat
jika kita menolak asumsi sentral kita dapat menolak
prediksi

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Can we prove a theory?
Can we expect that a theory of financial accounting (and hence, about
people) can provide perfect predictions in all cases?
A theory might not have perfect predictive capabilities, but still be useful
Saying that we have proved a theory on the basis of observations ignores
the fact that subsequent observations might not be in accordance with the
theoryBisakah kita berharap bahwa teori akuntansi keuangan (dan
karenanya, tentang orang-orang) dapat memberikan prediksi sempurna
dalam semua kasus?
Sebuah teori mungkin tidak memiliki kemampuan prediktif yang sempurna,
tapi masih berguna
Mengatakan bahwa kita telah membuktikan teori atas dasar pengamatan
mengabaikan fakta bahwa pengamatan berikutnya mungkin tidak sesuai
dengan teori

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PPTs t/a Financial Accounting Theory 2e by Deegan 1-27
Can we prove a theory? (cont.)
Falsificationists would argue that a theory can
never be proved, though it might be the best at a
particular point in time
Safer to say that our evidence supports a
pFalsificationists akan berpendapat bahwa teori
tidak pernah dapat dibuktikan, meskipun mungkin
yang terbaik pada titik tertentu dalam waktu
Aman untuk mengatakan bahwa bukti-bukti kami
mendukung teori tertentuarticular theory

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Dishonest tricks in argument trik tidak
jujur dalam argumen
Thouless (1974) identifies 38 dishonest tricks some writers use to support their
argument including
emotionally toned words
statements where all is implied but some is true
diversion to another question or to a side issue
use of speculative argument
prestige by false credentials
appeal to mere authority
Thouless (1974) mengidentifikasi 38 trik yang tidak jujur beberapa penulis
gunakan untuk mendukung argumen mereka termasuk
kata emosional kencang
pernyataan di mana semua tersirat tapi beberapa benar
pengalihan ke pertanyaan lain atau masalah sisi
Penggunaan argumen spekulatif
prestise oleh kredensial palsu
menarik otoritas belaka

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Why study accounting theories
Learning the rules of financial accounting without considering the
implications of accounting information is not recommended
Studying theories of accounting exposes students to various issues,
including
how elements of accounting should be measured
motivation for organisations to provide certain types of
accounting informationBelajar aturan akuntansi keuangan tanpa
mempertimbangkan implikasi dari informasi akuntansi tidak
dianjurkan
Mempelajari teori akuntansi menghadapkan mahasiswa untuk
berbagai isu, termasuk
bagaimana unsur-unsur akuntansi harus diukur
motivasi untuk organisasi untuk memberikan jenis informasi
tertentu akuntans

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PPTs t/a Financial Accounting Theory 2e by Deegan 1-30
Why study accounting theories (cont.)
motivation for individuals to support or lobby regulators for some
accounting methods in preference to others
the implications for organisations and their stakeholders if one
accounting method is chosen or mandated in preference to others
how and why the capital markets react to particular information
whether there is a true measure of income
motivasi bagi individu untuk mendukung atau lobi regulator untuk
beberapa metode akuntansi dalam preferensi untuk orang lain
implikasi untuk organisasi dan pemangku kepentingan mereka jika
salah satu metode akuntansi yang dipilih atau diamanatkan dalam
preferensi untuk orang lain
bagaimana dan mengapa pasar modal bereaksi terhadap informasi
tertentu
apakah ada ukuran sejati pendapatan

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