Ch. 4
Translated "let do", an economic system that is free from regulation.
What is "laissez faire"?
The type of risk that can be reduced by holding a wide variety of investments.
What is unsystematic risk?
The harmonization of IASB and FASB standards.
What is convergence?
This area of accounting research is based on the efficient markets hypothesis.
What is capital markets research?
Basic assumptions concerning the business environment.
What are postulates?
When a regulatory agency seeks to involve all affected parties in its deliberations.
What is due process?
This form of efficiency defines a market as being efficient if current prices fully reflect all information contained in past prices.
What is the weak form?
This model is characterized by a strong accounting profession, a limited role of government, and an emphasis on securities markets.
What is the Anglo-American (or Anglo-Saxon) model?
The accounting standard-setting body from 1959 to 1973.
What is the Accounting Principles Board (APB)?
The FASB's attempt to provide a metatheoretical structure to financial accounting.
What is the conceptual framework?
The theory that argues that the group being regulated eventually comes to use the regulatory process to promote its own self-interest.
What is Lifecycle (or Capture) theory?
This form of efficiency states that all information—both public and private—is completely accounted for in current stock prices.
What is the strong form?
This model is characterized by a weak accounting profession, strong governmental influence, and an emphasis on debt markets.
What is the continental model?
The governmental body that is responsible for regulating the securities markets and protecting investors.
What is the SEC?
According to the conceptual framework, these are the two fundamental qualities of financial information.
What are Relevance and Faithful Representation?
This theory suggests that incentives exist for a firm to voluntarily disclose financial information in order to compete in the market for capital.
What is signalling theory?
After an earnings announcement, this term refers to the time lag associated with the full effect being reflected in security prices.
What is post-earnings-announcement drift?
This event highlighted the IASB's and FASB's common goal of developing accounting standards usable for both domestic and cross-border financial reporting.
What is the Norwalk Agreement?
The first national securities legislations in the United States
What are the Securities Act of 1933 and the Securities and Exchange Act of 1934?
The pervasive constraint on information that can be provided by financial reporting.
What is that benefits are greater than the costs?