QUESTION 1 Question 7.5:

Explain why a decision made in London by members of the International Accounting Standards Board and incorporated within an accounting standard could influence the business operating strategies employed by a manager in Melbourne, Australia.

QUESTION 2 Question 7.6:

If a manager is paid a percentage of profits, does this generate a motive to manipulate profits? Would this be anticipated by principals and, if so, how would principals react to this expectation?

QUESTION 3 Question 7.12:

Would managers who have negotiated debt contracts with accounting-based covenants based around rolling GAAP be relatively more likely to lobby an accounting standard-setter about a proposed accounting standard than would a manager from a firm who has negotiated accounting-based debt covenants that use frozen GAAP. Why or why not? Illustrate using AASB2 Share Based Payments and assume that it is the year 2003.

QUESTION 4 Question 7.17:

If senior managers within a company were rewarded by way of accounting-based bonus plans then would they, or the owners/shareholders (or both), prefer the use of conservative accounting methods? Explain the reasoning for your answer.

QUESTION 5 - Question 10.22

Accepted assumptions about market efficiency mean that it is the information content of disclosure, and not the form of the disclosure, that is valued by the market. Therefore it should not matter whether information is disclosed within the notes to the financial statements, or in the financial statements themselves. If this is true, then why would managers care if something such as a lease liability is disclosed only in the notes, or included within the liabilities disclosed within the balance sheet?