Accounting & Public Interest Alignment

This assignment delves into the complex relationship between accounting practices, public interest, and organizational goals. It examines various stakeholder perspectives, including those of professional bodies like the American Bankers Association, and analyzes how changes in accounting standards can impact both public and private interests. The discussion includes identifying potential tax benefits and deficiencies within income statements, highlighting the role of transparency and accountability in shaping responsible accounting practices.

Running head: CURRENT DEVELOPMENTS IN ACCOUNTING THOUGHT
Current developments in accounting thought
Name of the Student:
Name of the University:
Author Note:

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CURRENT DEVELOPMENTS IN ACCOUNTING THOUGHT
Table of Contents
Question 1........................................................................................................................................4
Question 2........................................................................................................................................7
Executive Summary.........................................................................................................................7
Introduction......................................................................................................................................7
Part A...............................................................................................................................................9
Copy of Four selected Comment Letters.........................................................................................9
 Heiskell and MacGillivray and Associates..............................................................................9
 Raytheon Company................................................................................................................10
 American Bankers Association..............................................................................................12
Part B.............................................................................................................................................12
Outlining the major issues covered in the Exposure Draft............................................................12
Part C.............................................................................................................................................13
Providing an in-depth assessment whether the behavior of regulator in introducing the Exposure
Draft can be explained by public interest theory...........................................................................13
Part D.............................................................................................................................................14
Describing in depth where there is agreement or disagreement between the parties who have
submitted Comment Letters...........................................................................................................14
Part E.............................................................................................................................................15

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Assessing whether the authors of the Comment Letters are utilizing the arguments for or against
regulation.......................................................................................................................................15
Part F..............................................................................................................................................15
Applying each of the theories of regulation (Public interest, Capture theory and Private interest)
to the various issues in the four selected comment letter and justifying which theory of regulation
best explains the comment on the issues.......................................................................................15
Part G.............................................................................................................................................17
Critically evaluate the underlying assumptions and assumptions of the theories of regulation with
regard to their application to the issues identified in the Exposure Draft and Comment Letters..17
Heiskell and MacGillivray and Associates................................................................................17
Raytheon Company...................................................................................................................17
Visa Inc......................................................................................................................................18
American Bankers Association..................................................................................................18
References and Bibliography.........................................................................................................20
Appendix........................................................................................................................................22

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Question 1
For this particular question, article is selected from “The Guardian” and the title is
“Accounting watchdog to investigate KPMG over Rolls-Royce audit”. The article is published
recently on 4th of May 2017. It is well understood that other articles are available that highlights
theoretical issues that leads to prohibited practices of some audit business that have an
undesirable effect on linked stakeholders of the specified business. The current article clearly
explains how accounting watchdog had investigated audit firms (KPMG) while auditing for
Rolls Royce (Zhang et al., 2016).
It is important to understand the fact that mainstream of business functioning in the
global market that have intention to increase the levels of profits. It requires implementation of
various company strategies that wins the confidence and trust of different stakeholders (Zeff,
2016). It is essential to win confidence and trust over the stakeholders that lead to enhancement
of business operations in the international business enterprise. This will lead to increasing the
growth rates as well as future cash flows at the same time. In this article, there was clear mention
about the process of Financial Reporting Council for reviewing the deal of Rolls Royce with
Serious Fraud Office that incurs £ 671 million for settling the allegations that leads to corruptive
activities. The issue had reached the public where FRC (Accounting watchdog of UK) had
properly takes initiatives for investigating into the KPMG audit with Rolls Royce (Ball, Grubnic
& Birchall, 2014). It was needed for investigating the case as there is involvement of engineering
group that sets for a bribery case with Serious Fraud Office for the year 2017.
On analysis, it is noted that Rolls Royce had made an agreement to incur £ 671 million
for settling long-term allegations of corruptions that is well-defined at the time of deferred

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examination (Miller & Power, 2013). Due to Brexit effect, there was high cost of settlement as
well as depreciation of pound value and this issues leads to yearly loss of more than 4.6 billion.
The loss incurred was the highest one for this business organization. FRC had taken initiation to
evaluate the KPMG audit in association with the financial statements for the company (Rolls
Royce) for the year 2010 and 2013. It was stated by the owner of KPMG that regulators have to
evaluate the issues that relates with public interest (Ball, Grubnic & Birchall, 2014). After
looking at the demand of KPMG, it can be stated that the audit work of Rolls Royce need to
carry out effectively with full care as well as due diligence that assures overall audit quality. It is
important to understand the fact that an apology had been made by Rolls Royce where they had
bribed the middlepersons for securing the orders in countries such as India, Indonesia, Nigeria as
well as China and Thailand. For instance, the company had paid £28 million to the
middlepersons in Thailand for getting access to few contracts (Meyer et al., 2013).
On evaluating the case, it is noted that Rolls Royce had bribed the SFO for settling the
fraud charges (Dillard, 2014). This action leads to contravention of public interest where SFO
concentrate mainly on defensive the events of business enterprise. Furthermore, the
middlepersons of the various nations had undertaken bribes in order to secure contracts of the
organization. Rolls Royce wanted that their competitors should not enter in the market and this
was treated as unscrupulous measures. There is direct intervention of FRC who was responsible
for investigating the market due to allegations and applied stringest regulations on the audit
business for evaluating as well as disclosing the financial statements in an effective way
(Klinglmair, Sala & Brandão, 2014).
The reputational theory explains the fact where the investors prefer in dealing with such
business enterprise that has strong reputation in the market and aligns with the efficient growth

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financials. In addition, the cost-benefit analysis over long-term shows dishonest actions that does
not take place that aligns with the organizational interests (Ball, Grubnic & Birchall, 2014).
Some long-term actions take place where dishonest behavior is likely to occur for obtaining
short-term benefits. As far as Rolls Royce is concerned, the business has made a corrupt practice
with SFO for resolving its bribery compulsion. Furthermore, the main purpose was to maintain
the faith levels with the shareholder for accumulating greater funds especially at the time of
funding capital projects. From the annual report of Rolls Royce for the year 2010 to 2013, it is
noted that the figures are misstated that enables the company for gathering sufficient funds from
the investors to undertake new contracts (Deegan, 2016).
It is recommended to the company to carry out their operational progress in the short-run.
It was due to this reason why the company incurs loss as there was loss in the confidence of the
investors. Furthermore, the allegations imposes the company to be identical with reputational as
well as public interest theories that explains the requirements for applying stringest regulations
for given audit business enterprise (Deegan, 2013).

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Question 2
Executive Summary
The main aim of the assignment is to assess the development application about Financial
Accounting Standards Board that relates directly with employee payment share-based accounting
as well as stock of compensation. In addition, there are main four respondents who are
responsible for providing comments on the exposure draft. Furthermore, the study of this section
highlights that the excess tax benefits and realizes the shortage as mentioned in the income
statement that are not undertaken. Therefore, the balanced fairness approach introduces facts that
minimize the volatility expenses that are mentioned in the income statement. The main objective
of the assignment is to reduce cost as well as complexity for bringing improvements in the
accounting for share-based payments that are issued to employees mainly for the public as well
as private companies. FASB affirms with the proposed changes that aligns with the accounting
for share-based payments as issued to employees in areas such as accounting for income taxes
that gets along with vesting or resolution of awards, presenting excess tax benefits as shown in
the cash flow statement, accounting for forfeitures, presenting employee taxes paid as shown in
the cash flow statement when an employer withholds shares for meeting minimum legislative
necessities as well as minimum statutory requirements.
Introduction
This section deals with introducing FASB and recommending different accounting
standards that allows exposure drafts and comments that are published by industries and
corporate business enterprises (Ball, Grubnic & Birchall, 2014). This particular proposal takes

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into account accounting standards for updating the stock-based compensation and it has the topic
number of 718. The mentioned standard title is Improvements of Non-employee share-based
payment accounting (Klinglmair, Sala & Brandão, 2014). It is important to bring improvements
in the non-staff share payment that assures proper reduction of cost. Furthermore, there are
different complexities present that maintain accurate information of financial users that are
mentioned in the financial statements of business enterprise. Therefore, the section mainly
concentrates upon different agreed and non-agreed comments for initiating such standard for
bringing improvements in the procedure of accounting in the most appropriate way. This section
mainly emphasizes upon facts after recommending various important accounting standards as it
updates stock based compensation for improving the procedure of accounting for ascertaining its
idealness (Christ & Burritt, 2015).

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Part A
Copy of Four selected Comment Letters
Heiskell and MacGillivray and Associates
Figure: Comment Letters (Financial Accounting Standards Board) of Heiskell and
MacGillivray and Associates

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Raytheon Company
Figure: Exposure Draft- Stock Compensation Topic 718- Improvements to Employee
Share-Based Payment Accounting

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 Visa Inc
Figure: Request for comments on Exposure Draft of Proposed Accounting Standards
Update on Compensation – Stock Compensation (Topic 718), or “the proposed update”

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American Bankers Association
Figure: IASB Exposure Draft 2015/3 - Conceptual Framework for Financial Reporting
Association
Part B
Outlining the major issues covered in the Exposure Draft
From the IASB and Conceptual Framework, it properly explains about measurement
bases in the Chapter 6. It discuss about various measurement bases and information that it
provided with relevant benefits and limitations. The section even determines the factors that need
to be considered at the time of selecting based on measurement. In the Exposure Draft, there is

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clear discussion of measurement bases that is categorized into different types such as historical
cost, current value, fair value and value in use for assets as well as completion worth for
liabilities.
In this exposure Draft, Question 8 is about Measurement bases that ask whether the
measurement bases are properly described in the conceptual framework. If the answer is no, then
to explain which measurement bases would be included with justifying reasons
In the Exposure Draft, Question 9 is about Factors that need to reflect on at the time of
selecting a measurement basis. In this question, it ask about whether the IASB correctly
identifies the factors at the time of measurement bases and if it is not defined, then explain it
with justifying reason.
In the Exposure Draft, Question 10 is about More than one relevant measurement basis
where question is asked whether to consent with the approach that is discussed in the paragraphs
6.74 to 6.77 and BC6.68.
Part C
Providing an in detail appraisal whether the behavior of controller in introducing the
Exposure Draft can be clarified by public interest theory
Public Interest Theory is one of the economic theories where directive is abounding in
reaction to the demand of the public for correcting an incompetent or unbalanced market
performance. In addition, the regulatory body is treated for representing the interest that benefits
society as it operates as it meets public interest of the regulators.

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CURRENT DEVELOPMENTS IN ACCOUNTING THOUGHT
To explain in detail, the public interest theory as well as reputational theory relates to the
above-mentioned article. Public interest theory explains the fact that there is high vulnerability in
the market as well as has the propensity to function unsuccessfully that favor an individual rather
than benefiting the overall community (Ball, Grubnic & Birchall, 2014). In order to monitor the
market effectively, there is government intervention needed. The theory explains that there is
development of regulations present as per public interest for correcting the ineffective practices.
From social perspective, it is noted that there is inefficient regulations that involves private
players as they are restricted to enter along with the competitors in the market (Klinglmair, Sala
& Brandão, 2014).
Part D
Describing in depth where there is conformity or discrepancy between the parties who have
presented Comment Letters
It is noted that Heiskell & MacGillivray and Associates agrees for modifying as per
FASB. The other respondents (Visa Inc, American Bankers Association and Raytheon
Company) disagreed to identify additional tax deficiencies as well as benefits that are mentioned
in the income statement of business enterprise. The main reason behind this will be rising of
volatility expenses that associate with income tax. It is therefore concluded it is essential for
FASB for assuring public interest by evaluating the strength of the application and it helps
accomplishing public interest.

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Part E
Assessing whether the authors of the Comment Letters are utilizing the arguments for or
against parameter
The authors of the comment letters enhance the process of stock compensation of most of
the international business enterprise. It is required to prepare financial statements after reducing
the pressure from the accountants as well as payment of cash related to the employers for tax
holding. Furthermore, the major issue highlighted in the proposal is the detection of additional
tax benefits as well as deficiencies as shown in the income statement of business enterprise. It is
because of this reason that public interest for enhancing the overall economy. It is important to
understand the fact that assured private interest gets along with proposal validity that should be
achieved in the most appropriate way (Klinglmair, Sala & Brandão, 2014).
Part F
Applying each of the theories of regulation (Public interest, Capture theory and Private
interest) to the different issues in the four preferred comment letter and justifying which
theory of regulation best explains the comment on the issues
In this proposal, it is clearly mentioned that the progress in non-staff share based
accounting is critical as it looks at the sentiments of the staff for evaluating the business
operation. The standard mainly gives an idea for encouraging each business for participating in
the comment process for getting the feedback. Furthermore, FASB shows the alterations in the
forms of questions as well as companies need to comment after getting the views. Business
enterprise need to provide comments that relates to the business operations. In the standard, it

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includes tax benefits as well as deficiencies and complexity for maintaining information that is
mentioned in the financial statements (Chatfield & Vangermeersch, 2014). Furthermore, it shows
relationship between additional tax benefits as well as cash inflows that permits business entities
for undertaking the accounting policy election, proposed expansion and tax payment procedures
of the business. After getting feedback, the usefulness can be modified by determining activities
for the overall economy.

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Part G
Critically assess the fundamental statement and supposition of the theories of regulation
with regard to their request to the issues recognized in the Exposure Draft and Comment
Letters
Heiskell and MacGillivray and Associates
Heiskell and MacGillivray and Associates is one of the accounting and auditing firm in
and across Australia that decided to the removal of the accounting tool of PIC for minimizing the
level of cost and issues in the given secretarial processes (Klinglmair, Sala & Brandão, 2014). In
addition, it is noted in the agreement that the business incorporates compensation expenses as
mentioned in the income statement that requires implementing tax deficits as well as benefits.
The third question relates to tax cash flow categorization, it is agreed that the action need to be
considered in the operational activities. The company has properly agreed with all the
modifications that had been proposed by FASB as these questions aligns with the public interest
as well as accounting standard that are essential for both staff members and the business
enterprise (Bebbington & Larrinaga, 2014).
Raytheon Company
The company is one of the technological as well as innovation firms that believe in
developing their brand image in the global market because of defense technologies and software
that relates to civil market and security tools (Klinglmair, Sala & Brandão, 2014). Raytheon
Company is US based business enterprise that intends to form effective corporate governance.
The company had successfully answered 2, 3 and 5 questions that are mentioned in the exposure

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draft. These answers was not agreed with Heiskell and MacGillivray and Associates on matters
relating to identification of additional tax benefits as well as deficiencies as mentioned in the
income statement. It is recommended that symmetrical equity approach helps in obtaining for
effective outcomes. It is due to this reason these realization accomplishes with the public interest
as well as organizational interest ignores the complete facts. However, it would not be treated as
identical with the theories like capture theory that agrees with the taxable cash flows. This
concept will be treated as operational activity as well as allowed for stored amount to the highest
marginal tax rates as and when applicable (Ball, Grubnic & Birchall, 2014).
Visa Inc
Visa Inc is one of the companies that operate in online payment technology that intends
to bringing improvements in the international procedures of payments. Furthermore, it is noted
that the modifications will help in providing benefits where disagreement gets aligned with
identifying additional tax benefits as well as deficiencies as mentioned in the income statement.
The alterations or modifications help in reducing level of complexity for most of the business
enterprise. Therefore, the modifications help in accomplishing the overall public interest as well
as organizational interest except the rejected ones.
American Bankers Association
American Bankers Association is one of the entities where the participants in the bank
mainly operates in USA as well as believes in enhancing the entire banking system and operating
activities at the same time (Klinglmair, Sala & Brandão, 2014). This entity had even shown that
there is agreement present with the FASB changes as compared to tracking additional tax
benefits as well as deficiencies as mentioned in the income statement. The real cause or reason
behind disagreement is that as it leads to differences present in the expenses of compensation as

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well as financial statements. Therefore, the relationship suggests assurances that align with
private interest theory as well as public interest theory.

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References and Bibliography
Ball, A., Grubnic, S., & Birchall, J. (2014). 11 Sustainability accounting and accountability
in the public sector. Sustainability accounting and accountability, 176.
Bebbington, J., & Larrinaga, C. (2014). Accounting and sustainable development: An
exploration. Accounting, Organizations and Society, 39(6), 395-413.
Chatfield, M., & Vangermeersch, R. (2014). The history of accounting (RLE accounting): an
international encylopedia. Routledge.
Christ, K. L., & Burritt, R. L. (2015). Material flow cost accounting: a review and agenda for
future research. Journal of Cleaner Production, 108, 1378-1389.
Deegan, C. (2013). Financial accounting theory. McGraw-Hill Education Australia.
Deegan, C. (2016). Financial accounting. McGraw-Hill Education Australia.
Dillard, J. (2014). 14 Legitimating the social accounting project. Sustainability accounting
and accountability, 233.
Klinglmair, M., Sala, S., & Brandão, M. (2014). Assessing resource depletion in LCA: a
review of methods and methodological issues. The International Journal of Life Cycle
Assessment, 19(3), 580-592.
Meyer, R. E., Höllerer, M. A., Jancsary, D., & Van Leeuwen, T. (2013). The visual
dimension in organizing, organization, and organization research: Core ideas, current
developments, and promising avenues. Academy of Management Annals, 7(1), 489-
555.

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Miller, P., & Power, M. (2013). Accounting, organizing, and economizing: Connecting
accounting research and organization theory. Academy of Management Annals, 7(1),
557-605.
Zeff, S. A. (2016). Forging accounting principles in five countries: A history and an analysis
of trends. Routledge.
Zhang, X., Yan, C., Sun, X., & Xiang, Y. (2016). Research Issues and Methods of
Contemporary Accounting Research and the Progress in Internationalizing
Accounting Research in China: An Analysis of Research Articles in International
Accounting Journals During 2009-2013. Contemporary Accounting Review, 1, 001.

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Appendix