Anthropological1 - 22

7/31/2019 Anthropological1 - 22

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ANTHROPOLOGICAL/

INDUCTIVEPARADIGM


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ACCOUNTING THEORY

Accounting theory has been defined as a coherent set of logicalprinciples that:

Provides a better undrestanding of existing practices topractitioners ,investors,manager and students

Provides a conceptual framework for evaluation existing

accounting practices

1

2

Guides the development of new practices and

procedures3


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Empirical versus no empirical

Inductive versus deductive

Normative versus positive

CLASSIFYING THEORIES


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Gilman

Hatfied

IjiriLittleton

Paton

They share their concern about the value of extant accounting

practices.

SEVERAL STUDIES QUALIFY ARE AS EXAMPLE OF THE

ANTHROPOLOGICAL/INDUCTIVE PARADIGM


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For example Ijiri considers the most important concernof accounting , accountability relationship amonginterested parties .

Emphasizing is current accounting practices can bebetter if we view accountability as the underlying goal .An accountabilitybased framework , the objective of accounting is toprovide a fair system of information flow between the accountor and theaccountee

Based on the underlying accountability relation , the accountee has acertain right to know ; at the same time this framework recognize thatthe accountor also has a right to protect privacy . More informationabout the accountor is not necessarily better . Better perhaps from thestandpoint of the accountee but not necessarily so from the overall

accountability relation .

YUJI IJIRI


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Arrives at his accounting principles from observation ofaccounting practice that valuated the significance of historicalcost and effect on accountability and making decision .

The central problem of accounting is to bring into association , in thepresent , the revenues identified with the present and their related costs, and to bring into association , in the future , the revenues identifiedwith the future and their related costs . In solving this problem , thosewho use accounting are , in effect , matching enterprise efforts andaccomplishments ; they are measured by the cost currently deductible

from revenue ; they are the revenue costs of the present ; they aremeasured by the costs that are differed as being revenue costs of thefuture

The fundamental problem of accounting therefor is to cut through acontinuing stream of cost and correctly assign portions to the presentand to the future

LITTLETON


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Gordon theory is practice-created and is practice conditioning

Gordon theory is on income smoothing

- proposition 1:the criterion a corporate management in selecting among accountingprinciples is its utility or welfare

- proposition 2:

The ability of management increase with1- its job security

2- the level and rate of growth in the managements income

3- the level and rate of growth in the corporation size

GORDON


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- Proposition 3The management goals stated in proposition 2 in depend on satisfaction ofstockholders = the greater job security , income ,etcof the management .

- Proposition 4Satisfaction of stockholders with a corporation increases theaverage rate of growth in income (or average rate of returnon its capital) and stability of its income .

Verified as proposition 2

GORDON


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This four proposition are accepted , it follow that a management would within

limits of power , the latitude allowed by accounting rules ,

1- smooth reported income

2- smooth the rate of growth income

(if the rate of growth is high , accounting practices that reduce it should be

adopted , and vice versa)

GORDON


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That shareholder satisfaction is solely a positive function of income and that

increases in stock pricesalways followincreases in accounting income

have been more seriously contested.

GORDEN'S ASSUMPTION


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*The management's utility is a positive function of expected compensation

of future periods and negative function of the dispersion of future

compensation.

*The choice of accounting standards can effect a firm's cash flow through

taxes,regulation,political costs,information production costs,and management-

compensation plans.

* Increase managerial wealth by increase the cash flows and share price.

*Increase managerial wealth by altering the terms of incentive compensation.

WATTS AND

ZIMMERMAN


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The basic subject matter is:

1-existing accounting practice,and

2-management's attitude toward those practices

BASIC SUBJECT


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This type of inductive reasoning to drive goals implicit in the behavior of an

existing system is not intended to be pro-establishment to promote the

maintenance of the status quo.the purpose of such exercise is too highlight

where changes are most neededandwhere they are feasible.Changessuggested as a result of such a study have a much better chance of actually

being implemented.

IJIRI VIEWS THE MISSION OF THE

ANTHROPOLOGICAL/INDUCTIVE

PARADIGM APPROACH AS FOLLOWS


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1.Information economics.

2.the analytical/agency model.

3.the income smoothing/earning management hypotheses

4.the positive theory of accounting

THEORIES


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1.techniques use in income smoothing research

2.techniquse in earning management research

3.techniques used inpositive theory research

METHOD

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