| Course | ACC 541 Accounting Theory & Research (ACC/541) |
|---|---|
| Week | 1 |
| Paper type | Accounting theory and research paper |
| Length | about 1,173 words, 4 double-spaced pages plus title page and references |
| Format | APA 7 student paper |
| School | University of Phoenix |
| Program | MS in Accounting |
| Updated | September 2026 |
Free sample paper for ACC 541 Week 1
Why the FASB Moved Crypto Assets to Fair Value: Normative Arguments, Positive Evidence and a Research Plan for a Composite Payments Company Holding Bitcoin
[Student Name]
University of Phoenix
ACC/541: Accounting Theory & Research
Week 1 Assignment
[Instructor Name]
[Date]
The payments company and its holdings are composites written for a model paper; standards and research findings come from the sources listed.
A composite payments company processes card and digital wallet transactions for small merchants. Three years ago its board authorized holding part of its excess cash in bitcoin, and it now holds 180 bitcoin bought at an average cost of $28,000. Until the company adopted the FASB's 2023 update, those holdings were accounted for as indefinite-lived intangible assets: carried at cost, written down whenever the price fell below carrying amount at any time in a period and never written back up. The old model reported every decline and none of the recoveries, which made the balance sheet a record of the lowest price ever touched rather than of what the company owned. This paper uses that change to explain accounting theory and research methods.
The Old Model and the New
Under the cost-less-impairment model, the company's holdings had been written down to about $3.1 million after a steep decline in its first year, even though bitcoin later traded well above the original cost. At year end, the holdings had a fair value of about $11.7 million, but the balance sheet showed $3.1 million.
The 2023 update requires entities to measure crypto assets within its scope at fair value, with changes recognized in net income, and to present them separately from other intangible assets (Financial Accounting Standards Board, 2023). On adoption, the company recorded a cumulative-effect adjustment to opening retained earnings of about $8.6 million before the related deferred taxes, and each later period's gains and losses flow through income.
What Accounting Theory Is For
Accounting theory seeks to explain and guide the choices that shape financial statements. Normative theory asks what accounting should be, usually reasoning from objectives such as usefulness to investors. Positive theory asks why accounting is what it is and predicts how it will affect behavior, testing its predictions with evidence. Watts and Zimmerman (1990) described positive accounting theory as an effort to explain and predict accounting practice using economic incentives such as contracting and political costs, in contrast to prescriptive theories that had dominated earlier. Both perspectives help evaluate the crypto update.
A Normative Evaluation
Under the conceptual framework, reporting exists to help investors, lenders and other creditors decide whether to supply resources to an entity (Financial Accounting Standards Board, 2010). Its fundamental qualitative characteristics are relevance and faithful representation.
Fair value is more relevant for bitcoin because the asset has an active market, no cash flows other than sale and value that depends entirely on its price. An investor evaluating the company's resources wants to know what the holdings are worth, not the lowest price reached since purchase. Fair value is also a faithful representation, since quoted prices on active exchanges are Level 1 inputs, verifiable and neutral. The old model failed neutrality: it was biased downward by design.
The strongest normative objection is volatility. Recognizing fair value changes in net income will make earnings swing with bitcoin prices, which could obscure the company's operating performance. The update responds by requiring separate presentation and disclosure, so readers can separate crypto gains and losses from payment processing results. A normative theorist might still argue for recognition in other comprehensive income, but the Board judged that net income treatment better reflects the economics of an asset held for its price.
A Positive Evaluation
Positive research asks whether the new numbers will be useful in practice and how managers will respond. Capital markets research since Ball and Brown (1968) has shown that accounting earnings are associated with share price changes, evidence that accounting numbers capture information investors use. Value relevance research extends this by testing whether particular measurements are associated with market values. For assets with active markets, fair values are expected to be value relevant because prices already exist; the question is whether reporting them adds information or simply confirms it. For crypto holdings, the evidence is still emerging.
Positive theory also predicts managerial behavior. Under the old model, companies had an incentive to present non-GAAP measures excluding impairments, and several did. With fair value in net income, managers may present measures that exclude unrealized gains and losses. The contracting perspective predicts that lenders will adjust covenant definitions to exclude crypto volatility, and some loan agreements already do so.
Standard Setting as a Source of Evidence
The update itself is evidence of how standards change. Crypto accounting was among the most requested topics in the FASB's 2021 agenda consultation, where preparers and investors both described the cost-less-impairment model as uninformative. The Board added the project, limited its scope to fungible crypto assets that are not issued by the reporting entity and exposed a proposal for comment before issuing the final update. That process is itself a form of research: the Board weighs comment letters, outreach with investors and its own staff analysis. A graduate student studying the update can read the basis for conclusions to see which arguments persuaded the Board and which it rejected, including the request for other comprehensive income treatment.
Designing a Research Plan
The controller wants evidence to support the company's adoption disclosures and investor communications. A focused research question is: after adopting fair value, did analysts' earnings forecasts for companies holding crypto assets become more or less dispersed? The method would be archival. The data would be forecast dispersion from an analyst database for companies that adopted the update early and a matched group that did not, comparing quarters before and after adoption. Limitations include the small number of adopting firms, the short time since adoption and the confounding effect of bitcoin's price movements. A simpler internal study, comparing questions received from investors before and after adoption, would give the company direct evidence at low cost.
Taxes and Deferred Balances
The change in measurement does not change taxation. For federal tax purposes, the bitcoin remains property with a basis equal to its cost, and gains are taxed only when the coins are sold. The book carrying amount now exceeds tax basis by the unrealized gain, which creates a deferred tax liability that will grow and shrink with the price.
Implications for the Company
The company now reports a balance sheet that reflects the current value of its holdings and an income statement whose net income swings with bitcoin prices. It will present operating income before crypto gains and losses as a separate subtotal, explain the adoption adjustment in its notes and disclose its holdings, cost basis and any restrictions, as the update requires.
Conclusion
The FASB's move to fair value for crypto assets is supported normatively because it produces more relevant and neutral information about an asset valued only by its price, and positive research suggests investors will use it while managers and lenders adapt around its volatility. A modest research plan can help the company measure how its own readers respond. Theory, in this sense, is not separate from practice; it explains why the practice changed and what to watch next.
References
Ball, R., & Brown, P. (1968). An empirical evaluation of accounting income numbers. Journal of Accounting Research, 6(2), 159-178. https://doi.org/10.2307/2490232
Financial Accounting Standards Board. (2010). Conceptual framework for financial reporting (Statement of Financial Accounting Concepts No. 8).
Financial Accounting Standards Board. (2023). Intangibles, goodwill and other, crypto assets (Subtopic 350-60): Accounting for and disclosure of crypto assets (Accounting Standards Update No. 2023-08).
Watts, R. L., & Zimmerman, J. L. (1990). Positive accounting theory: A ten year perspective. The Accounting Review, 65(1), 131-156.
What the ACC 541 Week 1 instructions ask
ACC 541 Week 1 generally asks graduate students to explain the role of accounting theory and to describe research methods used in accounting. Common prompts cover normative and positive theory, the conceptual framework as a theory of financial reporting, the standard-setting process and the kinds of evidence researchers use, such as archival, experimental and survey methods. Many versions ask students to apply these ideas to a current issue, evaluate a standard or propose a research question. At the graduate level, the paper is expected to engage with scholarly literature, use precise terms and support each claim with sources, with the FASB's guidance and peer-reviewed research cited in APA style.
How this ACC 541 Week 1 example is built
Crypto assets are a useful lens because the FASB changed their accounting recently, after years of debate, which lets the paper examine a standard in motion. The paper describes the old model and the new, using the company's holdings to show the difference in reported results. The normative section tests the change against the framework's objective and the tension between relevance and faithful representation. The positive section draws on the value relevance literature and on theories of why managers prefer certain methods. The research plan section frames a question, chooses a method and describes the data, showing how graduate-level research supports a practical accounting decision the controller must make this year.
ACC 541 Week 1 grading rubric: where the points go
The rubric at this level usually rewards a correct distinction between normative and positive theory, accurate use of the conceptual framework, engagement with scholarly research and a clear application to a current issue. Faculty check that claims about how investors use accounting information are supported by research, that the standard is described accurately with its effective date and scope and that the research plan has a precise question, an appropriate method and a realistic data source. Critical evaluation, including limitations and the strongest counterargument, carries weight. Graduate writing, organized argument, a balanced view of both theories and APA citations of the standard, framework and peer-reviewed literature complete the evaluation.
ACC 541 Week 1 help: mistakes to avoid
A frequent problem in ACC 541 Week 1 is describing theory in the abstract without applying it. Choose one standard or issue and use theory to explain it. Another is treating the conceptual framework as authoritative GAAP; it guides the Board but does not override the Codification. Students also cite research loosely; state what a study found and how it applies. Distinguish positive theory, which explains and predicts, from normative theory, which prescribes. When designing research, match the method to the question and name the data. Discuss limitations, such as small samples or short periods, and say how they would affect conclusions. Finally, connect the theory back to decisions preparers and users actually make.
Related ACC 541 sample papers
Other ACC 541 week samples
- ACC 541 Week 2: Inventory and Fixed Asset Research
- ACC 541 Week 3: Leases and Derivative Instruments
- ACC 541 Week 4: Debt, Contingencies and Segments
- ACC 541 Week 5: Pensions and Business Combinations
- ACC 541 Week 6: Consolidations and Equity
ACC 541 Week 1 questions, answered
What does ACC/541 Week 1 usually cover?
It usually covers accounting theory, including normative and positive approaches and the conceptual framework, and the research methods used in accounting, often applied to a current issue.
Where can I find a free ACC 541 Week 1 sample paper?
The crypto asset theory paper on this page, with normative and positive analysis and a research plan, is open on this page, annotated in the margin. Bring your own graduate topic; the opening draft we write costs nothing.
What is the difference between normative and positive accounting theory?
Normative theory prescribes what accounting should be, often from objectives and concepts; positive theory explains and predicts accounting choices and their effects using evidence.
How are crypto assets measured under the 2023 FASB update?
Crypto assets within its scope are measured at fair value, with changes recognized in net income each period and separate presentation and disclosure.
What is value relevance research?
Research that tests whether accounting amounts are associated with share prices or returns, as evidence of whether they capture information investors use.
Write yours, or have the desk draft it
This paper is an original model document written by our desk, not a submitted student paper and not an official University of Phoenix document. Read it for the moves, then write your own to the instructions in your classroom. If you want one built to your exact prompt and rubric, the first custom sample is free and arrives in 24 to 48 hours.
Request this one custom, free · All ACC 541 week samples · All courses