DEBATE -

Positive Theory
Vania (01014180014)
Gabrielle Inzen (01014180001)
Bella Tjendriawan (01014180005)
 Proponents of the positive theory of
accounting maintain that it provides
a description of existing accounting
practice. In fact, this theory has
arisen because existing theoretical
OPINIONS constructs do not fully explain
FROM THE accounting practice. Stated
differently, positive theory explains
POSITIVE what is, rather than what should be.
THEORY TEAM Thus, it can be used to explain why
companies make the accounting
choices that they do
 For example, a positivist would say that
conservatism has origins in the
contract markets, including managerial
compensation contracts and lender
The Contractual View debt contracts. To prove their point,
one would argue that, absent
Positive accounting can be
conservatism, managerial
associated with the contractual
compensation agreements may
view of the firm in which
reward managers based on current
accounting practices have
performance that may later prove
evolved to mitigate contracting
unwarranted.
costs by establishing agreement
among varying parties

Unlike normative
accounting theory,
Positive explains
observed accounting
practice. Unlike normative
accounting theory it does
NORMATIVE
not rely on consensus of
accounting professionals.
Because there is no set of goals
that is universally accepted by
accountants, normative
accounting theory
development may not provide
POSITIVE appropriate, practical
VS accounting standards. Thus,
since normative accounting
theories rely upon acceptability,
the resulting theoretical
development may be suspect.
 Positive accounting theory should
help us to better understand the
sources of pressures that drive the
accounting standard-setting process
ACCORDING and how accounting standards affect
TO WATTS individuals and individual behavior
AND and thus the allocation of resources.
ZIMMERMAN According to the theory, managers of
firms make accounting choices
because of their own self interests.
If we can better understand how accounting
standards affect management, then we can do a
better job of writing standards to help bring about
appropriate, rather than dysfunctional management
behavior. If we don’t know how accounting
standards will be used, then it is unlikely that the
goals of transparency and better reporting will be
achieved.
THANK YOU