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The usage of accounting numbers in management compensation contracts
Finance & Accounting
Pages 3 (753 words)
Although the Conceptual Framework views the primary use of accounting numbers as decision making, we still see accounting measures used in contracts for management compensation…
(4 marks) b) Find a company (other than Qantas) which uses accounting numbers in their management compensation contracts. Identify the company and given an example of an accounting number that they use in their management compensation contracts. [NOTE: the company must be an Australian company, currently listed on the stock exchange. You must not refer to any financial statements before 2012. Any references to financial statements should clearly indicate the number of the page referred to.] (2 marks) c) On the 25th May, 2012, Hastie Group Ltd (http://www.hastiegroup.com.au) advised the market that an employee “deliberately caused … irregularities in Hastie's accounts in the 2008?09 financial year”, leading to a $20 million dollar adjustment to its full?year profit. Hastie’s announcement to the market indicated that “some current and former senior management may have participated in the irregularities and failed to apply the required standards of financial supervision and review.” If Hastie’s executives had received bonuses based on this incorrect figure, do you believe they should have to return this money to the company? Why or why not? (4 marks) Answers a. A management compensation contracts is a type of contract that is designed to connect the shareholder’s goals with those of the executives or CEO. ...
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