• introduction to FAT,
• the effects of historical versus current value accounting (iphone 5 example),
• brief historical development,
• information asymmetry leading to adverse selection and moral hazard problem, and
• how to understand research papers effectively.

• review of chapter 1,
• how the use of current value accounting increases relevancy of financial statements and can help reduce adverse selection problem
• how the use of historical value accounting increases reliability of financial statements and can help reduce moral hazard problem,
• difference between certainty and probability certain,
• construction of financial statements under certainty and probability certain situations and found that current value accounting can only work if everything is 100% certain, otherwise current value falls apart because there can be no agreement of current value from everyone,
• current value accounting is balance sheet forcused while historical value accounting is income statement focused, and
• there is no true net income because each financial statement user has their own expectations (probability and outcome) and risk averseness.

• review of chapters 1 and 2,
• introduction of prior and posterior probabilities from Chapter 3,
• decision making using prior and posterior probabilities (using restaurant selection, matchmaking, and textbook examples),
• how accounting information can help users update and revise their probilities, and
• introduction to risk, return, and beta.

• overview of previous chapters,
• presentation and report topics to cover,
• chapter 4 efficent market,
• examples of decisions made under behavior finance, and
• practice questions from chapter 3.

• summary of how theories are tested in the research papers,
• earnings response coefficient and the six factors,
• accounting information being public goods, and
• the use of measurement approach.

• presentation of the Ball & Brown and Krishnaswami & Subramaniam research papers,
• low R square of the explanatory power of accounting information towards share price,
• behavior finance,
• clean surplus theory, and biased and unbiased accounting, and
• conditional and unconditional conservatism

• presentation of the Frankel & Lee research papers,
• summary of chapters 1 to 6,
• clean surplus theory,and
• concept of economic consequence and ESOP.

• presentation of the Dichev & Skinner research papers,
• concept of economic consequence and ESOP,,
• positive accounting theory,
• bonus plan, debt covenant, and political cost hypothesis,
• opportunistic and efficient contracting versions of PAT,
• introduction to game theory, and
• Nash equilibrium.

• three presentations on the topics of manager bonus scheme, incentive plan, and earnings management, and
• a summary overview of Chapter 9.

• game theory, cooperative and uncooperative behavior, and Nash equilibrium,
• using the concept of game theory to determine the optimal level of bonus to motivate managers,
• showed that better quality net income and accounting information will improve contracting efficiency of managerial labor contract,
• the relevation principle and its problems,
• Holmstrom’s agency model to use more than one variable as manager's performance measure,
• trading off between sensitivity and precision for performance measures,
• contract incompleteness and rigidity means accounting policies matters while market still efficient,
• how to improve the precision of net income as performance measure,
• the congruence of performance measures to payoff of firm,
• manager's compensation risk and how can shareholders manage this compensation risk,
• whether executive compensation too high, and
• the power theory of exective compensation.

• trading off between sensitivity and precision for performance measures,
• contract incompleteness and rigidity means accounting policies matters while market still efficient,
• how to improve the precision of net income as performance measure,
• the congruence of performance measures to payoff of firm,
• manager's compensation risk and how can shareholders manage this compensation risk,
• whether executive compensation too high,
• the power theory of exective compensation,
• patterns of earnings management,
• evidence of earnings management with bonus, debt convenants, political heat, and investor expectation motivations,
• investor-based and contractual-based arguments for good side of earnings management,
• other methods for earnings management other than accruals,
• contracting and financial reporting perspective to bad side of earnings management, and
• use of standard setting and disclosure to reduce bad earnings management.

• proprietary versus non-proprietary information,
• sources of reguations in financial reporting,
• ways to characterize information production,
• social benefits and social costs of information production,
• contractual incentives for information production,
• the Coase theorem,
• market based incentives for information production,
• the disclosure principle,
• signalling,
• diversification of estimation risk, and
• decentralized regulation.

• public interest theory and interest group theory,
• criteria for standard setting,
• the regulator's information asymmetry,
• the Laffont and Tirole model and the Dessein model,
• review of course purpose and flow of material,
• review of chapters and major points.

For this course, a general purpose non-financial calcuator can be used. Students who do not have ready access to a financial calculator should be able to perform all the required analysis and calculations using a general purpose non-financial calculator for the tutorials, assignments, mid-term test, and final examination.

You can also use a non-programmable financial calculator for the tutorials, assignment, mid-term test, and final examination. Common financial calculators are HP12c and TI BAII PLUS. User manual in simplified chinese and a tutorial for the HP12c can be found here and a simple tutorial for the HP12c can be found here. User manual for the TI BAII can be found here.

Regardless of the types of calculators used for this course, students are responsible for their own equipment and they cannot be shared in a quiz, test, or examination situation. As a result, students MUST bring their own calculators to each class. In addition, each student must be proficient in the use of their own equipment.

Electronic translators CANNOT be used for quiz, test, or examination situations, but they can be used during class (only with volume off) and your own study time.

There are specific terms that apply to accounting and finance, and there are various online sources that can help students understand these terms.

Download and print for reference:

• Hong Kong Exchange glossary of terms (English to Chinese)
• 88translation.com finance dictionary (Chinese to English, English to Chinese)

Online finance dictionaries:

• Reuters Chinese to English and English to Chinese finance dictionary
• Goldman Sachs English to Chinese finance dictionary
• Goldman Sachs Chinese to English finance dictionary
• Morgan Stanley English to Chinese finance dictionary

Other unverified sources of financial references:

• Finance Street - a finance related site prepared by the government
• Financial glossary of terms
• List of dictionaries