Research suggests that information asymmetries such as those described in your text and Watts (1977) and Healy & Palepu (1993) result in the potential for managers to behave in their own self-interest (for example, by manipulating accounting disclosures within permissible limits or by disclosing only information that it is necessary to disclose). Given this, and that regulation in financial reporting exists, what should regulators do, or not do, to provide for financial reporting? Consider as well the approaches that FASB and IASB are alleged to take FASBs approach has been described as rules-based, while IASBs has been described as principles-based (but not all would agree with that characterization). Which approach would fit your model?