Acco 400 Questions
Chapter 2 questions
(1) Why is Manulife’s share price ($13.96) less than its embedded value per share ($20.02)?
(2) Critically analyze Husky Energy Inc.’s reserve recognition accounting (RRA).
Is it relevant?
Is it reliable?
As a manager, do you like to report such information?
As an investor, do you like oil and gas companies to provide such information?
Why do regulators require RRA to be reported as supplementary information?
(3) The author states that “under the real-world conditions in which accounting operates, net income does not exist as a well-defined economic construct.” How do you understand this?
Chapter 3 questions (1) Referring to Table 3.2 in the textbook, prepare a similar table for a perfect, or fully informative information system, that is, an information system which perfectly reveals the true state of nature. Do the same for a non-informative information system, that is, one that reveals nothing about the true state. Use the probabilities from the two tables you have prepared to revise state probabilities by means of Bayes’ theorem, using the prior probabilities and GN message given in textbook Example 3.1. Comment on the results.
(2) Explain the meaning of the main diagonal probabilities in an information system.
(3) Do professional accounting bodies accept the rational decision theory? Explain
Chapter 4 questions
(1) What does securities market efficiency (semi-strong form) mean? What are the characteristics of securities market efficiency?
(2) What are the implications of securities market efficiency for financial reporting according to Beaver (1973)?
(3) What is the role of financial reporting in an efficient market? Use Figure 4.2 to guide your argument/analysis.
Chapter 5 questions
(1) Refer to the separation of market-wide and firm-specific security returns as shown in Figure 5.2. What factors could reduce the accuracy of the estimate of abnormal returns?
(2) Why is Ball and Brown (1968) an important accounting
(1) Why is Manulife’s share price ($13.96) less than its embedded value per share ($20.02)?
(2) Critically analyze Husky Energy Inc.’s reserve recognition accounting (RRA).
Is it relevant?
Is it reliable?
As a manager, do you like to report such information?
As an investor, do you like oil and gas companies to provide such information?
Why do regulators require RRA to be reported as supplementary information?
(3) The author states that “under the real-world conditions in which accounting operates, net income does not exist as a well-defined economic construct.” How do you understand this?
Chapter 3 questions (1) Referring to Table 3.2 in the textbook, prepare a similar table for a perfect, or fully informative information system, that is, an information system which perfectly reveals the true state of nature. Do the same for a non-informative information system, that is, one that reveals nothing about the true state. Use the probabilities from the two tables you have prepared to revise state probabilities by means of Bayes’ theorem, using the prior probabilities and GN message given in textbook Example 3.1. Comment on the results.
(2) Explain the meaning of the main diagonal probabilities in an information system.
(3) Do professional accounting bodies accept the rational decision theory? Explain
Chapter 4 questions
(1) What does securities market efficiency (semi-strong form) mean? What are the characteristics of securities market efficiency?
(2) What are the implications of securities market efficiency for financial reporting according to Beaver (1973)?
(3) What is the role of financial reporting in an efficient market? Use Figure 4.2 to guide your argument/analysis.
Chapter 5 questions
(1) Refer to the separation of market-wide and firm-specific security returns as shown in Figure 5.2. What factors could reduce the accuracy of the estimate of abnormal returns?
(2) Why is Ball and Brown (1968) an important accounting