New Accounting Standard Proposal Free-Samples for Students

Question: Explain why the Manager might object to the Proposed New Standard. Answer: Explanation on why the manager might object to the proposed new standard Basing on the proposed new accounting standard, the manager might object its proposal because since the manager is risk averse, an increase in the volatility of expected future remuneration will decrease the expected utility thus holding the expected value of compensation constant (Ballwieser, Bamberg, Beckmann, Bester, Blickle, Ewert, Gaynor, 2012). Given the rigidity of the contract, the manager will object to the new standard because the expected utility of remuneration is lower. In this particular case, an increase in volatility will significantly decrease the amount of income that should be recorded by the company. This action is basically not welcomed by any manager in any organization because most of the companies exist so as to make profit necessary for expansions and growth. Consequently, the manager is assumed to be a risk-averse individual, increases the amount of compensation and debt covenants risks often lowers the managers expected utilities because apprehension of the manager's legitimate concerns about the aspect of risks often assists diverse students to understand the controversies that basically surrounds the many standards of accounting (Mitnick, 2015). Diverse risk averse managers are often aware of various risks that may result in any change or alteration in the accounting standards. This proposed new standard will limit the amount of revenues that the firm is capable of recording because it negatively affects the volatility of the net income. The manager usually expects the company to continue its operations for a significantly longer period so as to increase their ultimate shareholder's wealth and the share price of the company. References Ballwieser, W., Bamberg, G., Beckmann, M. J., Bester, H., Blickle, M., Ewert, R., Gaynor, M. (2012).Agency theory, information, and incentives. Springer Science Business Media. Mitnick, B. M. (2015). Agency theory.Wiley E