1). Each of the three theories of regulation (Public Interest Theory, Regulatory Capture Theory, Dan Private Interest Theory) has its strengths and limitation in describing accounting standard setting, either past or present. What do you believe are those strengths and weaknesses? Provide an example where you believe each of the theories has applied, or is likely to apply.

2).For the short case below, describe the probable valuation techniques as related to machine acquired during an acquisition (there are two probable techniques).
An entity acquires a machine in a business combination, which will be held and used in its operations. The machine was originally purchased from an outside vendor and was customized by the acquired entity for use in its operations. However, the customization of the machine was not extensive. The entity determines that sufficient data are available to apply the cost approach and because the customization was not extensive the market approach. The income approach is not used because the machine does not have a separately identifiable income stream.

3).Within annual reports, companies frequently disclose information about how their managers are rewarded in terms of the components of their management compensation plans.
Required: 

Select two large companies listed on a security exchange and identify the components of their management remuneration plans. Then, discuss how the respective components would be expected to align the interest of the managers with those of the owner, and to minimize the contracting costs of the organization. Discuss also whether the scheme affect management behavior in increasing/decreasing the quality of information shared to public. (Hint: use Positive Accounting Theory framework).

Answer rating: 100% (QA)

1In the context of public interest theory Legislation is intended to provide and protect consumer interests by performance appraisal than that of an unregulated situation This theory implies that ther... View the full answer