22420 Study Guide - Final Guide: Embryology, Information Asymmetry, Accrual
Document Summary
Lecture 1: introduction the function of accounting. Regulation political implications (i. e. lobbying e. g. Regulation political implications (i. e. lobbying e. g. mining exploration in. Information accounting information must be: relevant, reliable/faithful responsibility, comparability, timely. Note: tradeoff between characteristics e. g. brand name (relevance vs. measurability) Incentives: subjectivity earnings mgmt, managers rewarded for performance (e. g. telstra cooper cables depreciation taxation purposes) Increasing social complexity: creates (cid:498)hard records(cid:499) that make it harder for people to disagree on, communicating info about the business. + gives party the right to demand the performance of whatever is promised trust: accounting numbers are used in contracts because, assumption that people act in their own self interest, delegation of decision-making. Information asymmetry agency problem goals of those that provide capital (principals) may not be the same as those of management (agent) = costly: costs to delegating decision making to someone else, bad decision, equity, lenders. Perquisite consumption management will consume additional resources not required in performance of their employment.
