Kieran Read is the CEO of Plummet Airways, and to provide an appropriate incentive the Board of Directors have approved a management compensation contract whereby Kieran receives a bonus of $1m for every 1 percent that the return on equity (ROE) exceeds 12% in the financial year 2016/7.

Required

1. Describe how this might influence the accounting policy choices Kieran makes.

2. Identify one accounting policy choice Kieran might make.

3. Explain how this choice would be made and why.