Strategies for Teaching the Accounting Theory Course: Curriculum, Pedagogy and Resources Carla...

Strategies for Teaching the Accounting Theory Course:

Curriculum, Pedagogy and Resources

Carla Carnaghan - University of LethbridgeJames Dodd – Drake University

Irene Gordon - Simon Fraser UniversityDavid Gilbertson - Western Washington

University

Strategies for Teaching the Accounting Theory Course

Topics to be discussed:• What do we mean by an accounting theory

course?• Why we think a theory course is important

• Roles for the accounting theory course in the curriculum

• Considerations in designing the course content

• Pedagogical techniques and resources

Strategies for Teaching the Accounting Theory Course - AAA Annual Meeting. August 4, 2010

What Do We Mean by An Accounting Theory Course?

• Not a lot of literature on such courses (James Martin, MAAW - AECM)

• Nature of the course is very diverse: CPA Exam Prep Current Topics Financial Economics Conceptual Framework Course

• Our Focus in Teaching Accounting Theory:To help students better understand why accounting

“looks like it does”, and the challenges of creating accounting standards and information given diverse needs and stakeholders

Strategies for Teaching the Accounting Theory Course - AAA Annual Meeting. San Francisco. August 4, 2010

Why is a Theory Course Important?

• Increasing complexity of business transactions More understanding of what accounting is trying to do is

important

• Impossibility of prescriptive rules Trend toward principles-based accounting standards

• Provides students with a different vision of accounting

– Social responsibility

– What could be, rather than what is• e.g. use of all fair values, replacement cost accounting,

different approaches to accounting for intangibles


Roles for the Accounting Theory Course

in the Curriculum: Skills and Knowledge• Critical thinking and reasoning

– Using evidence; challenging status quo• Speaking and writing skills• Conceptual knowledge (e.g. fair values, adverse

selection)• Research skills

– Accounting standards– Financial reporting regulations– Practitioner articles and commission reports– Research studies

• Motivation for standards• What to do when there is no clear guidance


Roles for the Accounting Theory Course: Complementing Other Parts of the

Curriculum (1)

• Review/integrate topics from other accounting coursesConceptual FrameworkExamples using existing standardsImplications of current accounting approaches

(e.g. pensions)• IFRS• “Forest” rather than “Trees” (Why, not how)• Discuss current business and accounting issues

Derivatives and off balance sheet financingAccounting ScandalsManagement CompensationFair Values


Roles for the Accounting Theory Course: Complementing Other Parts of

the Curriculum (2)

• Relating accounting to other disciplines:– Economics (“The dark side”?)– Psychology – History– Ethics


Designing the Course’s Content: What Do We Want Students to

Learn?• Critical Thinking

• Role of Assumptions in Developing Accounting

• Using Evidence to Develop/Support Positions• Writing/Articulating a Coherent Position

• Learning to Learn• Research skills

• No one right answer?• Judgment skills (better answers)


Designing the Course’s Content: What Do We Want Students to

Learn?• My emphasis is on the development of accounting

standards using history as the starting point. The idea is to understand how we got to where we are before starting the trip.

• I emphasize likely future trends and how the students as professionals can find/support ways to account for economic transactions. The find/support leads to a research orientation to stay abreast of change.

• I want students to develop empathy for differing positions


Designing the Course’s Content: Foundations

• Financial economics • Critical theory• Conceptual framework• Psychology• Valuation bases (HC vs FV vs RC etc) - R. Jensen,

AECM• A mix can be helpful to make students think

about underlying assumptions• History of development of accounting thought can

be helpful in explaining particular developments


Designing the Course’s Content: Concepts that Might be Covered

Economics Psychology Critical Conceptual

Framework

Efficient Markets

Behavioral Finance

Ethics Relevance

Information Asymmetry

Prospect Theory

Stakeholders Reliability

Agency Theory

SatisficingHistory of Accounting

Valuation Bases

Earnings Management

Attribution Theory

Stewardship

Standards Setting

Decision Usefulness

Market Failures

Valuation Bases


Designing the Course’s Content: Controversies that Might be Covered

Topic Econ Psych

Critical

Framew’k

Fair Values X X X

Intangibles/Contingencies**

X X X

Market efficiency X X X X

Management Comp. X X X

Earnings Management** X X X X

IFRS Adoption X X

Derivatives/Shadow Economy**

X X X


Pedagogical Techniques and Resources (1):

Alternative Delivery Methods• In a traditional classroom, a mixture

of face-to-face and online– Drake University– University of Iceland

• Online delivery, 100%– Blackboard Discussion Boards (forums)– Blackboard Quizzes for content facts– VoiceThreads for community building


Pedagogical Techniques and Resources (2): Assignments and

Projects• Debates on Controversies (Team)• Position Papers - Followup to Debates (Individual)• Beginning and ending assignments• Group Assignments (in and out of class)• Microeconomic experiments (See Book by Bergstrom and

Miller - McGraw Hill)

• Draft Standards projects - analysis (IFRS or FASB)• Concept Maps - visual representations of concepts and

the relationships among them. (See Simon, J. 2007. Concept Mapping in a Financial Accounting Theory Course. Accounting Education: an International Journal. September. v. 16(3). 273-308)



Assignments and Projects

• A project comparing U.S. GAAP with IFRS and non-IFRS standards with the goal of developing a “best standard” by using components from around the world. It requires review of academic and industry literature, databases, and the political processes affecting standards setting.

• Research papers: Newspaper article about a business and use accounting research to explain the situation

• Requirement to organize and present seminars – examples from student group’s seminars


Pedagogical Technique Example: Sample Student Group

Presentation - Experiment

ManagerHonest (H) Distort (D)

InvestorBuy (B) 60, 40 20, 80

Refuse to Buy (R)

35, 20 35, 30

• Investor: to buy or not to buy• Manager: Honest or Distort

• Assumptions:• One-period game• Non-cooperative• Rational Individuals

Pedagogical Technique Example: Sample Student Group Presentation -

Debrief of the Experiment

• Nash Equilibrium:– Rational investors would not invest– Rational managers would distort information– Suboptimal points for both parties

• Solutions: Cooperative agreement (auditor)• Enron: Unethical managers and auditors

– Short-run profit> long-run costs• Regulations: Government, courts, standard

setters

Pedagogical Technique Example: Student Group Presentation Slide

Pedagogical Technique Example: Student Group Executive Compensation Activity

Pedagogical Technique Example: Student Group Activity

Explanation (1)Your group represents one of four groups:• 1. CEO/Executive Team• 2. Shareholders• 3. Compensation Committee A• 4. Compensation Committee B

• For the CEO/Executive and Shareholder Teams, your goal is to persuade the compensation committee to choose a compensation package that is most beneficial to you.

• For the compensation committees, your goal is to understand the arguments from the two sides and decide a reasonable compensation package. (It does not have to be right in the middle.)

Pedagogical Technique Example : Student Group Activity

Explanation (2)• Two Rounds of Discussion

– 1st Round• Compensation Team A and CEO/Executives• Compensation Team B and Shareholders

– 2nd Round• Compensation Team A and Shareholders • Compensation Team B and CEO/Executives

Student Group Role Play: Scene One (1)

•Role play illustrating agency theory– Lilian as Manager– Lindy as Owner

Student Group: Scene One (2) – The PERFORMANCE REVIEW

Student Group Role Play Setting (3):

HUGE LOSS!

Student Group slide illustrating how AGENCY THEORY worked in the Role

Play Example (4)


Ways of Increasing Student Motivation/Enrollment

• Students participate in performance evaluations.• Students take turns leading the discussion• Students have to write “journals” on each reading• Discuss current issues in relation to course - big picture• Link to career functions and cases (Z. Swanson- AECM)• The course is a graduate-level course in our Master of

Accounting (MAcc) program. I changed the title from “Accounting Theory” to “Emerging Accounting Issues” without changing content or structure and enrollments increased.

• I find that introducing current articles into the discussions tends to make the idea of accounting theory more meaningful.


Pedagogical Techniques and Resources (4)

Performance Evaluation - Excerpt

Group Members: Seminar Number: Last four digits of your student number: Irene

Circle only one number

HOW EFFECTIVE WAS THE GROUP IN: for each comment. Poor Excellent |_____________________________________|

CONTENT OF SEMINAR:1. Highlighting the main points of the readings through

seminar discussion, brief overview or summary? 1 2 3 4 5

2. Linking the seminar topics to current business developments? 1 2 3 4

5 3. Using visual aids and/or handouts to provide support and insight into today's topics? 1 2 3 4

5


Pedagogical Techniques and Resources (5): Other Techniques

• Means for tracking participation• “Get Out of Jail Free”


Pedagogical Techniques and Resources (6): Selected

Textbooks

Author Country GAAP Focus

Schroeder, Clark, Cathey (Wiley) U.S.

U.S. /some IFRS

Framework

Wolk, Dodd, Rozycki (Sage)

U.S U.S. Framework

Scott (Prentice Hall) Canada IFRS/U.S. Economic

Deegan (McGraw-Hill)

Australia/ Europe

IFRS Mixed

Godfrey et al (Wiley) Australia IFRS/Aus Mixed



Selected Textbooks - Major Topics


Schroeder

Wolk Scott Deegan

Godfrey

Conceptual Framework X X X X

Uses of Accounting Info X X X

Income Concepts/Valuation Bases

X X X XX

F/S and A&L Topics XXX XXX X

Regulation of Financial Accounting

X X X

Economic Theories XXX X X

Social Responsibility X X

Behavioral Research X X

Critical Perspectives X

Int’l Accounting X X XX XX X

Pedagogical Techniques and Resources (8): Other Resources

• Wall Street Journal - instructor mailing list–

http://ProfessorJournal.com• AECM mailing list and archives

(http://www.aecm.org)

• MAAW http://www.maaw.info/• “Smartest Guys in the Room” video• Accounting Horizons/Accounting Perspectives• Senate Hearings• IASB/FASB - discussion papers and roundtables


Pedagogical Techniques and Resources ( 9): Other Resources

• Annual testimony by Chairman of SEC, PCAOB, and FASB to U.S. House of Representatives.

• The Wall Street Journal• Financial Times• Lexis-Nexus• Google Scholar• FASB’s Accounting Standards Codification• Larger CPA firms’ websites


Strategies for Teaching the Accounting Theory Course:

Summary Points• Very helpful as a complement to the rest of the

curriculum– Cover “why” and judgment questions– Big Picture– Critical Thinking

• Content– Lots of choice: conceptual framework, valuation

bases, controversies, current research; all of the above

• Assessment– Can encompass presentations, debates, papers,

research, journals, experiments• Range of resources available

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