Accounting Theory and Practice Reasearch Assignment

for the article below choose and accounting theory and do the following:


Select an accounting theory that is relevant to each article:
• DO NOT invent a theory – you MUST only use the theories listed on page 7 of this document. Note: the ‘market for lemons’ is NOT a theory.
• Each theory can only be used once i.e. three (3) different theories should be used.
– Example, if you select an article that relates to the Bonus Plan Hypothesis then your other two articles cannot pertain to the Bonus Plan Hypothesis.


For each article, apply the chosen accounting theory in a report style format:
• Summary (Part A):
– Summarise the article in 100 words or less. Note: the summary is not included in the 500 words allowed for each article, thus the maximum number of words for each article is actually 600 words.

• Accounting Theory Issue (Part B):
– Identify and describe the issue or issues in the article that are relevant to, or can be explained using, the accounting theory. Note: DO NOT describe the accounting theory itself, but instead outline the issues that led you to choose the article (i.e. ask yourself, what is this article dealing with that relates to accounting theory).
– Suggested word count = 100 words.

• Analysis (Part C):
– Provide an analysis of the relationship between the theory and the newspaper article. Describe and appropriately reference the applicable accounting theory and then show how the facts of your article are directly related to the theory. Use references to support your arguments.
– Suggested word count = 350 words.

• Conclusion:
– Provide a brief conclusion.
– Suggested word count = 50 words.


• Positive Theories (too broad to use for assignment – need to pick a specific theory)
• Normative Theories (too broad to use for assignment – need to pick a specific theory)
o True Income Theory
o Decision Usefulness Theories
 Decision-makers emphasis
 Decision-models emphasis

• Capture Theory
• Private Interest Theory (Economic Interest Group Theory)

• Efficient Market Hypothesis

• Legitimacy Theory
• Stakeholder Theory (Two branches of Stakeholder Theory – ethical (moral) or normative branch and positive (managerial) branch

Positive Accounting Theory
• Positive Accounting Theory – opportunistic perspective and/or efficiency perspective
• Political Cost Hypothesis
• Management Bonus Hypothesis
• Debt Hypothesis

Stockland bids to ease row on executive pay
Carolyn Cummins, The Sydney Morning Herald, October 6, 2011

STOCKLAND has been forced to tweak its executive remuneration policy to appease shareholders before its annual general meeting.
The move comes as executives in real estate investment trusts (REIT) come under pressure for being paid large bonuses at a time when security prices are little changed on a year ago.
The Australian Shareholders’ Association has been vocal in the mismatch between security prices and executive pay and warned the issues will be hotly debated.
Les Goldmann, the policy and research manager of the Australian Shareholders’ Association, said the REIT sector has offered up the worst of the worst when it comes to the disconnect between shareholder returns and executive payouts.
Although Stockland had already instigated a review of the policy, its executives have bought forward changes that will see more alignment with the share price and their own short term performance.
Under the proposals, to be retrospective from July 1 this year,short term incentives for all executive committee members, including Matthew Quinn, the managing director, will be awarded in Stockland securities rather than fully in cash as is currently the case.
Stockland’s chairman, Graham Bradley, said yesterday the board was committed to ensuring executive pay was fair and competitive and the changes more closely aligned executive remuneration with of security holders’ interests.

Read more:

The theory involved could be Positive Accounting Theory, under Management Bonus Hypothesis. Make sure you discuss about the conflict of interest between shareholders and management.

Thank you.

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