QUESTION 4 - (Marks 18)

Assume that Kahuna Company Ltd decides to undertake an upward revaluation of its non-current assets just prior to the end of the financial year, the effect being that the total assets of the company increases, as does the total shareholders' equity.

a)Explain the decision of management to undertake an asset revaluation in terms of the debt hypothesis of Positive Accounting Theory.

TypE answer here

b)Explain the decision of management to undertake an asset revaluation in terms of the management compensation hypothesis of Positive Accounting Theory.