Accounting Standards and Theory

This document discusses the public interest theory, private interest theory, and capture theory in relation to accounting standards and theory. It explores how these theories explain the behavior of regulators and the impact of proposed regulations on the welfare of society and stakeholders. The document also includes references to relevant literature on the topic.

Running Head: ACCOUNTING STANDARDS AND THEORY
ACCOUNTING STANDARDS AND THEORY
Name of the Student
Name of the University
Author Note

1ACCOUNTING STANDARDS AND THEORY
Table of Contents
Answer to Question c.................................................................................................................2
Answer to Question d.................................................................................................................3
References..................................................................................................................................5

2ACCOUNTING STANDARDS AND THEORY
Answer to Question c
Public Interest Theory
It is defined as the part of the economical welfare as well as it emphasizes that the
framed regulations should be able to maximize the welfare of the society and the regulation
has resulted from doing the analysis of the cost and benefit for determining whether the cost
that is incurred for improving the market operations outweighs the increased welfare of the
society. In addition, public interest theory seeks for protecting and providing benefits to the
large number of the public by the best possible allocations of the scarce resources for the
individual as well as collective goods (Grunig, 2017). The public interest theory of the
regulation explains that the intervention of the government in the markets and the regulatory
rules that is associated as the responses to the failures and imperfections of the market.
Hence, the theory of public interest theory of the regulations helps in promoting the general
welfares in comparison with the well organized stakeholder’s interests (Koopman, Mitchell &
Thierer, 2014).
The question “whether the behavior of the regulator is explained by the ‘public
interest theory’ is justified, it is because that the regulatory is getting support and positive
responses from the companies. The issue raised by the regulator was “determination of the
fair value of the assets that are underlying by the lessors, which are not dealers or the
manufacturers (Koopman, Mitchell & Thierer, 2014).
The treatment of the proposal by the regulator treats the total cost of the acquisitions
that is a part of net investments in lease, there will be consistency of the reported yield on the
financing lease with the pricing of the lease. In case, these cost is not included, then the
reporting would have to be done through the artificial inflated yields, it is because the

3ACCOUNTING STANDARDS AND THEORY
acceptance of the lease delivery at that locations, which triggers the high delivery costs and
upfront the sales tax (Koopman, Mitchell & Thierer, 2014).
Therefore, these are the reasons for which the proposal has provided the information
that enables for taking more useful information for the investors, it is because the results that
is reported will be now more faithfully represented the economies of transactions. It is also
operational because of its consistency with the way the lessor who are basically not the
sealers or manufactures determines the fair value under the Topic 840, Leases (Bös, 2015).
Hence, the behavior of the regulator is justified to the ‘public interest theory, it is
because, the regulator in this proposal has worked upon the cost and benefit approach by
reducing the overall cost associated with the implementation of the proposal and providing
the benefit with the help of economical transactions. In terms of welfare of the society, the
regulator by this proposal with aids in the welfare of the society with the help of providing
more useful information to the public and the stakeholders that consists of customers and
investors (Andrade, 2014).
Answer to Question d
Public Interest- According to this theory, the regulations of the government is termed as the
instrument that is used for overcome the shortcomings of the imperfect competitions, any
undesirable market results, missing markets and market operations that is unbalanced. The
regulations can be improved with the help of improving the allocations by maintaining,
facilitating as well as imitating the market operations. The exchange that took place between
the factors of the goods and services in the market assumes definitions, assertions and
allocations of the rights of the individual property as well as freedom to the right (Kjeldsen,
2014).

4ACCOUNTING STANDARDS AND THEORY
As per the comment letter, the proposal will enable market efficiencies by the
proposal will help in the economies of the transaction which is the effect of the cost benefit
approach. Hence, the proposal is in the public interest (Kjeldsen, 2014).
Private Interest- It is the theory which means that those involved in government has
generally same motivations that of the other private sector. If the decision that is taken by the
government matches the public as well as private interests, then the public is being served.
However, in case there is conflict between the interest of public and private then the interest
of the public will lose (Mansbridge, 2018).
The proposal by the regulator does not justify with the private interest theory, it is
because the government is independent arbiters. They work for the social benefit. This
market operates with the bid system, that is demand and supply if the market. Hence, this
proposal by the regulator does not fits this theory as well (Cattaneo, Meoli & Vismara, 2015).
Capture- Sometimes the regulations instead of promoting the efficiency, the agency of
regulatory creates the insufficient allocations of the resources. Therefore, this theory helps in
providing the insights into the closed connections that arises between the regulatory agency
of the government as well as regulations charged in the industry. It occurs when the interest
of the interests of the firms, organizations or the political groups are given priority over the
public interests that leads to the net losses to the society (Carpenter, 2014).
The proposal does not justify with the theory of capture because the public interest is
protected. In addition, the proposal does not intend to increase the wealth. Moreover, the
government plays the independent role in between the interested groups (Carpenter, 2014).
Therefore, it is concluded that from all the three theories of regulations (public
interest, private interests and capture interest), that the most justified theory of regulations is
public interest theory. It is because, the comments letters has describes that how the proposal

5ACCOUNTING STANDARDS AND THEORY
will work for the welfare of the company as well as the welfare of general public and the
stakeholders as a whole. Therefore, public interest theory best explains the theory (Kjeldsen,
2014).
References
Andrade, T. (2014). The impact of regulation, privatization and competition on gas
infrastructure investments. Energy, 69, 82-85.
Bös, D. (2015). Pricing and price regulation: an economic theory for public enterprises and
public utilities (Vol. 34). Elsevier.
Carpenter, D. (2014). Reputation and power: organizational image and pharmaceutical
regulation at the FDA (Vol. 137). Princeton University Press.
Cattaneo, M., Meoli, M., & Vismara, S. (2015). Financial regulation and IPOs: Evidence
from the history of the Italian stock market. Journal of Corporate Finance, 31, 116-
131.
Grunig, J. E. (2017). Symmetrical presuppositions as a framework for public relations theory.
In Public relations theory(pp. 17-44). Routledge.
Kjeldsen, A. M. (2014). Dynamics of public service motivation: Attraction‒selection and
socialization in the production and regulation of social services. Public
Administration Review, 74(1), 101-112.
Koopman, C., Mitchell, M., & Thierer, A. (2014). The sharing economy and consumer
protection regulation: The case for policy change. J. Bus. Entrepreneurship & L., 8,
529.
Mansbridge, J. J. (2018). A deliberative theory of interest representation. In The politics of
interests (pp. 32-57). Routledge.