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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:
- 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:
- 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?
- Explain whether the board of directors could be motivated to try to inflate reported profits.
- Use the opportunistic perspective of PAT to explain the potential for managers to manipulate corporate disclosure.