From the 1970s, accounting research moved to a more scientific approach to counter the dominance of normative research. Learn vocabulary, terms, and more with flashcards, games, and other study tools. According to watts and zimmerman, the property rights theory adopted by positive accounting researchers assumes that the firm is a nexus of. I january 1978 towards a positive theory of the determination of accounting standards ross l. Positive accounting emerged with empirical studies that proliferated in accounting in the late 1960s. Positive accounting is the branch of academic accounting research that seeks to explain and predict actual accounting practices.
According to watts and zimmerman, positive accounting theory should help us to better understand the sources of pressures that drive the accounting standardsetting process and how accounting standards affect individuals and individual behavior and thus the allocation of resources. To predict and explain accounting choice accounting researchers had to in. Positive accounting theory prenticehall contemporary. Positive accounting theory contemporary topics in accounting series prenticehall contemporary topics in accounting series prenticehall international editions. Positive accounting theory, using the book of the same name by watts and zimmerman 1986 as the primary source of information about that theory, is subjected to scrutiny. Positive accounting theory is shown to be applied economic positivism. It had also provided with a suggestion regarding explanation regarding evolution in modified accounting policies and measuring the importance of. It is argued that positive accounting theory does represent a problem. According to the theory, managers of firms make accounting choices because of their own self interests. It is important because of its vigorous emphasis on the entitys actual choice of financial accounting technique or, more broadly, financial reporting activity. Positive accounting theory zimmerman free pdf file sharing.
The primary objective of positive accounting theory pat is to explain as well as predict accounting practices in contrast to the normative accounting theories, which are prescriptive in nature and which were a dominant part of accounting research till the two controversial articles were published by watts and zimmerman in 1978. Tracing the historical background of positive accounting research through its economic roots shows that the positive aspect of the watts and zimmerman approach is more rhetoric than methodology. Positive accounting is the branch of academic accounting research that seeks to explain and. The positive accounting theory is developed by watts and zimmerman and is based on work undertaken in economics and is heavily dependent on the efficient market hypothesis, the capital assets pricing model, and agency theory. Simon school of business administration at the university of rochester. The 1978 paper helped generate the positive accounting literature which offers an explanation of accounting practice, suggests the importance of contracting costs, and has led to the discovery of some previously unknown empirical regularities. Oclcs webjunction has pulled together information and resources to assist library staff as they consider how to handle coronavirus. A research on positive accounting theory 2273 words 10 pages.
This article provides the beginnings of a positive theory of accounting by. They advocate the development of positive theories to explain actual accounting. Pdf positive accounting theory and science researchgate. Positive accounting theory and science semantic scholar. The three key hypotheses are bonus plan hypothesis, debt hypothesis, and political cost hypothesis. There is a focus on understanding and explaining the techniques and methods that accountants currently use for example why the conventional historic cost accounting system is the primary measurement system applied today. Academic research on accounting theory positive accounting theory, watts, r. Positive accounting theory tries to make good predictions of real world events and translate them to accounting transactions. It was organized as an academic school of thought of discipline by the work of ross watts and jerold zimmerman in 1978 and 1986 at the william e. Everyday low prices and free delivery on eligible orders. Referring to the popper idea, it is claimed that the objective of accounting theory is to explain and predict accounting practice watts and zimmerman, 1986, p. Watts and zimmermans positive accounting theory provides a refreshing, controversial and important contribution to accounting thought. In that situation there is no basis for predicting and explaining accounting choice. Numerous and frequentlyupdated resource results are available from this search.
Positive accounting theory pat is a general term for any theory that provides descriptive information regarding the behavior of accountants. Designed for the seniorgrad level course in accounting theory or advanced topics courses. In relation to positive accounting theory, because there is a need to be efficient, the firm will want to minimize costs associated with contracts. Watts and zimmermans positive accounting theory is. Reliable information about the coronavirus covid19 is available from the world health organization current situation, international travel. Positive accounting theory, political costs and social. An accounting theory theory is an explanation for observed accounting and auditing practices. See all 7 formats and editions hide other formats and editions. Following reiter 1998, the paper provides detailed evidence and an illustration of how positive accounting theorists attempts to colonize social and environmental accounting research have proved a failure. To predict and explain accounting choice accounting researchers had to. Positive accounting theory is concerned with explaining and predicting current accounting practices watts and zimmerman, 1986. Positive accounting theory was revealed to the debate by watts and zimmerman book positive accounting theory. Criticizing positive accounting theory boland 1992. Positive accounting theory 978068617 by watts, ross l zimmerman, jerold l.
According to watts and zimmerman positive accounting. Positive accounting theory paperback january 1, 1997 by jerold l. Watts and zimmermans positive accounting theory sunset. Watts and zimmermanpositive accounting theory 3 if accounting methods do not affect taxes they do not affect firm value.
It is argued that positive accounting theory does represent a problem shift toward a domain of research that is appropriate for chicago school economics. Zimmerman, positive accounting theory, prenticehall inc. Further reproduction prohibited without permission. The book discusses the role of theory in empirical work. While normative theories tend to recommend what should be done, positive theories try to explain and predict. Such an explanation is necessary for interpretation of empirical associations between variables. Contract costs involve accounting variables as contracts can be stipulated in terms of accounting information such as net income, and financial ratios. Accounting theory definition the business professor. Buy positive accounting theory prenticehall contemporary topics in accounting series united states ed by watts, ross l. Watts and zimmerman watts and zimmerman promoted pat through a number of journal publications, starting with watts and zimmerman 1978.
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