Essay 7101AFE Financial Accounting Theory And Practice

987 Words May 6th, 2015 4 Pages
7101AFE Financial Accounting Theory and Practice
Tutorial Questions for Tutorials 1- 6: Semester 1 2015
TUTORIAL 1 - Semester 1 2015

Deegan Topic 1: Introduction to financial accounting theory

QUESTION 1 – Question 1.2:
If you developed a theory to explain how a person’s cultural background influences how they prepare financial statements, would you have developed a positive theory or a normative theory?

The first of all, it is important to understand the mean by a ‘theory’. According to Contemporary Accounting Theory 4e,

Oxford English Dictionary provides various definitions, including:
A scheme or system of ideas or statements held as an explanation or account of a group of facts or phenomena

A positive theory based on some
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They state, ‘there has been a strange herding tendency, especially around legitimacy theory’, as well as stating that they ‘also have a sneaking feeling that institutional theory may be coming up fast as the next theory around which to herd’.

What do they mean by this apparent practice of ‘herding’, and what are some possible advantages and disadvantages that are related to this practice?

In the give circumstance, a common phenomenon in herding is the management of some enterprises, marker behaviour. As inadequate of information and lack of understanding, it is hard for investors to make reasonable expectations of future marker uncertainty, are often extract information by observing the behaviour of those around, in which information is continuously passed, many people will be roughly the same information and reinforce each other, resulting in the herd behaviour. ‘Herding’ is a kind of nonlinear mechanism of the non-rational behaviour resulting from individual rational behaviour of the collective.

The advantages of the performance of ‘herding’ for the adoption of specific or temporary situation advantage concept and the way of behaviour is accepted on the long-term nature of the dominant idea and behaviour way. However, people will follow the public agree, to their own opinions with default negation, and not subjective thinking about the meaning of events.
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