Positive accounting theory and science

The first two sources contain some methodological discussion by the two protagonists of PAT and the empirical accounting literature is surveyed to determine how it developed during the last three decades.

what is positive accounting theory

The development and emergence of PAT stirred huge controversy and debate among accounting academics. Positive Accounting Theory, Science and The Controversies Abstract Positive accounting theory PAT 1 has been one of the most influential accounting research programs during the twentieth century.

watts, r. and j. zimmerman (1986), positive accounting theory, edgewood cliffs, nj: prentice hall.

They only adopt accounting policies that allow them to gain, in the view that the firm also gains. It is not clear how the future will unfold and we have to wait for that.

Positive accounting theory: a review

Finally, this paper notes that the debate has increased the methodological awareness of accounting students and the proliferation of research approaches saves one from methodological tyranny. There are important dissimilarities between these also. Feyeraband would dispute this claim, because, according to him, science knows many methods and anything goes in science. Management compensation hypothesis Bonus plan hypothesis [ edit ] The management compensation hypothesis states that managers who have accounting incentives, or their remuneration that is tied up with the firm's accounting performance will tend to manipulate accounting method and figures to show the accounting performance better than it should be. The first two sources contain some methodological discussion by the two protagonists of PAT and the empirical accounting literature is surveyed to determine how it developed during the last three decades. W and Z 2 propose that the objective of accounting theory should be explanation and prediction of accounting practice. Positive Accounting Theory, Science and The Controversies Abstract Positive accounting theory PAT 1 has been one of the most influential accounting research programs during the twentieth century.

Second, it examines three major criticisms labeled against PAT. W and Z 2 propose that the objective of accounting theory should be explanation and prediction of accounting practice.

normative accounting theory

This paper examines three major controversies surrounding PAT. Feyeraband would dispute this claim, because, according to him, science knows many methods and anything goes in science.

This paper takes PAT to include both research programs.

Positive accounting theory: a review

The criticisms centered on both the definition and scope of accounting theory and the methodology of PAT. Different types of hypothesis exist such as political cost, bonus plan and debt hypothesis that show what motives make the managers choose one accounting method over another. If the definition of accounting theory i. Older managers will tend to ignore any research and development costs because it will lower current year profits affecting their income. The next section provides a brief sketch of the development of positive accounting theory and then the development of the PAT is compared with standard accounts of the development of science in the third section. Learn how and when to remove this template message The opportunistic perspective holds the view that managers, who are agents to the principal, act to their self-interests. It would be interesting to see how this literature developed over time and compare its development with the development of science. Finally, this paper notes that the debate has increased the methodological awareness of accounting students and the proliferation of research approaches saves one from methodological tyranny.

They claim in several places of the book that this is the view of theory in science and cite PoincarePopperand Hempel in support of their claim.

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Positive accounting