Current Developments in Accounting Thought - Additional Assignment
Question 1 -
Mather and Peison (2006) report that public debt contracts tend to have a lower average number of accounting based debt covenants as well as less binding debt covenants relative to private debt contracts. (For example, in relation to debt-to-asset constraints in both public and private debt agreements, the covenants in the public debt agreements were found to be "looser: meaning that the ratio percentage is typically higher in the public debt contract.)
You are required to write an essay explaining why this would be the case, supporting your arguments with references to Mather and Peirson (2006) and other relevant sources.
Question 2 - Assume that a government regulator makes a decision that all companies with a dead office in Australia must separately disclose, within their annual financial reports, the amount of expense incurred in relation to the training of employees. The companies must also spend at least 5 per cent of their reported profits on training employees.
You are required to write an essay that
a) Explains the decision made by the regulators in terms of public interest theory.
b) Explain the decision made by the regulator in terms of the economic interest group theory of regulation.
Support your arguments with references in APA 6 style from relevant sources.
Question 3 -
Identify a listed company, and then
a) Identify at least one positive and one negative externality generated by the organisation and identify the stakeholders affected by the externalities.
b) Would these externalities directly impact on the income or expenses (and therefore profit) of the organisation?
c) In your opinion, is the failure to recognise externalities a fundamental limitation of our current financial reporting requirements? Explain your answer.