A number of accounting policy choice theory of the

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Accounting policy choice of a number of theoretical issues

Associated with the accounting policy choice of the following three main theories: First, the efficient market hypothesis, the second is positive accounting theory, the economic consequences of the three theories. Theoretical issues of accounting policy choice is also related to the accounting standards. First, the efficient market hypothesis (EMH) Jenson 1978, the efficient market is defined as: a set of information on Qt, if the group information in accordance with the transaction can not earn economic profits, then the market is efficient. 1 EMH theory is that strong in the second or the strong stock market, the market can not have any preference to account for changes in accounting procedures, including all the information to respond. The only change in tax revenue caused by the accounting cash flow effect. In the absence of tax conditions, changes in accounting procedures do not affect stock prices. EMH predict how stock prices regardless of changes in accounting earnings with fluctuations in stock prices is certainly the final stock value of unbiased measurement of the future. EMH that since the exchange of information, capital markets will eventually understand the existence of a company cash flow problems. A company may not rely on accounting fraud as a means to conceal the long-term cash flow problems. Once outside that, then over time a strong stock market gains will be implicit in the accounting of future cash flow problems and to assess the ballpark is reflected through the current stock price. Accounting income securities market will not always be led astray, and will make the stock value of unbiased estimates of the future. Even in a company-specific accounting procedures from outsiders, the effective stock market will continue to use the enterprise's accounting procedures unbiased prediction, and the accounting procedures will produce the expected future earnings does not bias the procedures assessment. Short,[link widoczny dla zalogowanych], EMH accounting policy choice that does not matter, does not affect the cash flow and enterprise value, the formation of efficient capital markets will not bias the stock price. Second, the positive accounting theory (PAT) PAT study of accounting policy choice is through the dividend program, debt covenants and political costs of the study were derived on the three assumptions. 2 1. Bonus plan assumes that making a dividend plan the enterprise, its managers are more likely to report earnings during the next period ahead to confirm. 2. Debt to equity ratio assumption to make After introducing the hypothesis: assume that other conditions remain unchanged, the higher the company's debt-equity ratio, the more corporate managers may choose to report earnings from future periods will be transferred to the current accounting procedures. 3. Scale assumption to make unchanged, the larger the company, its managers may choose the more current income that can be deferred to the next phase of the accounting procedures. A large number of empirical results basically confirmed the three hypotheses. In short, PAT that the existence of management personnel accounting policy choice behavior. Third, the economic consequences theory (ECT) 史蒂芬杰夫 published in his 1978 article entitled William Scott (Scotc, WR.) Economic consequences will be defined as: From nature that the company's accounting policies and their changes really affect the (matter). 4 the emergence of economic consequences, according to Scott's point of view, from In brief, they signed the contract from the company, especially management compensation contracts and debt covenants. If the accounting policy choices will have an impact, enterprise-specific accounting policies used and the time distribution and change in real terms, for investors, is an important source of information. In fact, managers may use accounting policy choice of a reliable signal of the disclosure of inside information inside information to ease the internal and external stakeholders information asymmetry. Scott believes that changes in accounting policies and their impact on managers and investors, and even lead to interest politicians. He stressed that the accounting policies here refers to any one accounting policy is not specifically refer to the cash flow that affect some. Since many major changes in accounting policies and accounting policies are related to the economic consequences and economic consequences of the concept in line with reality. Summary, ECT that has economic consequences of accounting policy choice, although it may not affect cash flow, but it can affect the value of its stock price. IV Review is generally believed that, EMH and ECT in the accounting policy choice is the two opposing schools of thought. EMH theory, the accounting policy choice does not affect the cash flow and enterprise value of the securities market regulator formed spontaneously all unbiased insight into the stock price; and ECT that the accounting policy choice has economic consequences and affect business value. The results of empirical accounting research more likely to ECT. I believe that, because of information asymmetry, the existence of such issues as insider information, the information cost is not zero, therefore the stock market do not yet have the ability to see through the corporate value. Fifth, the impact of accounting standard-setting EMH theory, since the accounting policy choice does not have an impact on corporate value, and thus the formulation of accounting standards to the enterprise management personnel should be some room left , do not unduly limit the management of the accounting policy choices, can provide a number of options. PAT believes that the choice of accounting policy is a contract allows companies to minimize the cost of overall demand, not a bad thing, the unity of the guidelines should not be too strong and should retain some room for the huge contract to avoid future repetition costs. ECT that, as with the economic consequences of accounting policy choice, so there will be a Standard-setting bodies of these interventions will be reflected accordingly, there are two aspects: First, expand the disclosure of information on their own; the second is to allow different stakeholders in the development of guidelines to provide them with the future release of new guidelines for comments opportunity to comment draft. Difficulties faced by accounting standard-setting bodies, on the one hand, to maintain good accounting theory; the other hand, had to be political considerations. Accounting standards enacted by the results of the two aspects of balance. Today, the world's accounting standards setting body with broad representation from the representatives of the parties, the development process in the use of the full program (dueprocess) provides the community an opportunity to express their views. Accounting policy guidelines is not selective, multi-processing method is a benchmark and a maximum of two alternative treatment. Note: 1. 2. Watts, RL, Zimmerman, JL, forward, Huang Shizhong other translation: Scott, WR: EINANCIALACCOUNTINGTHEORY.PrenticeHall, inc., 1997.P187, P186