a. If an accounting standard is introduced that requires certain types of expenditures to be expensed rather than capitalised, and that type of expenditure is discretionary, would you expect management to change their expenditure patterns from what they would have been in the absence of the standard? Use the results of empirical research described in this chapter to support your argument.

b. Would your expectation in the above situation be different if the manager is rewarded primarily on the basis of accounting earnings?

c. What effect would the further knowledge that the manager is approaching retirement have on your views?