HI6025 Accounting Theory and Current Issues – Case Study Report

 

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Assignment Brief:

• Referencing Styles: APA
• Words: 1750
• Course Code: hi6025
• Course Title: accounting theory and current issues
• University: Holmes Institute
• Country: AU

Page 3of 7HI6025 Accounting Theory and Current Issues Assignment Specifications Part A The corporate disclosure practice will help all the stakeholders to understand and measure business operation. Annual financial statement and particularly income statement is one of the most important ones. However, a company’s reported profits will be impacted by different factors, including when particular transactions and events are recognised and how such transactions and events are measured.

Requirement:

1. Using earning management concept, discuss why the timing of recognising events that impact income, revenue or profit or expenses are important for managers?

“Maximum Part BABC Ltd has incorporated a bonus plan that rewards the board of directors (executive members) by providing a bonus of 3 per cent of reported profits. This is an Accounting-based incentive has as has the adv which the high the accounting results may be based on subunit or divisional performance.”

A well-informed labour market will motivate management to work to maximise the value of its firm. Underperformance might lead to dismissal and, if the labour market is efficient in disseminating data, a ‘failed manager might have difficulty attracting a position with comparable pay elsewhere. “(Deegan, 2020). Requirement:

1. Using Positive Accounting Theory (PAT), discuss the bonus theme in general and why who put the bonus plan (Accounting-based) in place in ABC Ltd?
2. Explain whether the board of directors could be motivated to try to inflate reported profits.
3. Use the opportunistic perspective of PAT to explain the potential for managers to manipulate corporate disclosure.