Share-Based Payments And The Positive Accounting Theory Sample Assignment


Share-based payments are notable aspects of employee remuneration offered to directors, senior managers, and other employees. Share-based payments mainly include share options and shares offered to senior managers in an organisation. Besides, an entity can offer share-based payments to parties such as suppliers and key business stakeholders. The aim of the share-based payments as an element of remuneration is to bolster the performance of the individuals granted the payments, thus enhancing the effective and efficient performance of an organisation. The IFRS 2 standard requires organisations to observe the effective awarding of share-based payment as a crucial aspect of the total compensation package (Nichols, Betancourt & Scott 2017). However, in some instances, unreliable financial reporting occurs in organisations when managers seek to secure their self-interest. The Positive Accounting Theory (PAT) applies to situations where accounting professionals fabricate records to favour the interests of top managers in a company. As such, the IFRS 2 underlines the need to integrate measures that foster the reliability of the financial records that capture share-based payments (Nazareth et al. 2017). In this respect, this paper justifies the extent to which the key assumptions of PAT facilitate an understanding of self-interest practices regarding share-based payments offered to senior employees, including directors and managers among other parties.

The Key Assumptions of PAT

The positive accounting theory is based on the forecasting of the future’s real-world occurrences and the translation of the foreseen events into current accounting transactions. PAT seeks to explain and forecast events unlike normative theories that aim at providing recommendations for the actions that a party needs to consider. In this respect, professionals in the area of accounting use PAT to explain and predict future events, thus making accounting decisions in the meantime. The key assumptions of PAT facilitate the development of explanations and predictions regarding the financial position of an organisation. Nonetheless, the theory’s key hypotheses may undermine the observation of the required accounting standards in an organisation (McCarthy 2015). For instance, accounting managers can use biased predictions to record financial statements that seek to favour their interests as the beneficiaries of share-based transactions.

Important to note, the PAT framework facilitates an understanding of the behaviours of accountants, owing to the assumptions it upholds. The key hypotheses include the bonus plan, debt covenants, and political costs. Three key hypotheses of PAT facilitate an understanding of the application of the theoretical framework in the field of accounting. Through the hypotheses or assumptions, accountants’ behaviour falls in line with the expectations of accounting standards such as the ones provided by the IFRS 2.

The bonus payment hypothesis assumes that managers in the accounting area are more likely to select accounting procedures that move the foreseen earnings to the current period (Nnadi & Tanna 2016). The move is geared towards increasing the bonuses and benefits granted to them in the current period. The approach is also applicable to share-based payments where accountants use predictions of future earnings to place them in the current reports for their benefits (Deller 2017). The debt covenant hypothesis holds that accountants are more likely to increase the current earnings from the expected earnings, thus violating the accounting-based debt covenant. By so doing, the management “escapes” the violation of the debt covenant by using future figures to fix the current situation. Moreover, the political cost assumption seeks to fabricate the current financial figures by using expected earnings to prevent the attraction of additional costs from political policies such as taxation.

The key assumptions of the PAT influence the share-based payments issued to directors and managers among other parties. In particular, the theory uncovers how managers’ self-interest makes them behave in ways that undermine the observance of accounting standards (Griffiths & Lucas 2016). Thus, looking at the extent to which the self-interest approach undermines the accounting standards recommended by IFRS 2 is relevant in the context of this paper.

The Issue of Self-interest in the Recognition and Measurement of Share-based Payments

The IFRS 2 provisions offer the criteria for recognising and measuring share-based interest to facilitate the observance of accounting standards in an organisation (Deller 2017). Notably, the standard aims at undermining the aspect of self-interest among managers by providing a basis for recording dealings that indicate the actual transactions, which denote an improvement of a company’s financial performance (Lueg, Punda & Burkert 2014). Therefore, by recognising all transactions that merit the granting of share-based payments, as well as the appropriate measurement procedures in accounting, the IFRS 2 instils the need for accountants to observe the recommended professional standards.

The IFRS holds that shares or the rights to shares issued to directors and managers among relevant parties need to be in line with any increase in the equity component (Melis, Gaia & Carta 2015). As such, the accountant is required to expense the offsetting debit entry in a scenario where the payment of particular goods or services does not meet the representation of a particular asset. Therefore, there is the need for acknowledging the underlying expenses whenever goods or services are consumed. For instance, issuing shares to a manager to purchase an inventory should be regarded as an increase in inventory that should be expensed accordingly only after the selling or impairment of the directory. Nonetheless, the aspect of self-interest undermines the recognition of such share-based payments where accountants expense the inventory increment before it is sold and/or impaired (Richter & Schrader 2017). Thus, the accountant will be predicting the sale of the inventory in the future and recording the expected earnings in the current financial records as a way of ensuring that they benefit from the share-based payments in the present period.

Furthermore, giving fully vested shares, as well as the rights to shares, is acknowledged as recounting to past service whereby the entire amount of the grant-date regarding the fair value is expected to be expensed instantly (Barth et al. 2014). In this respect, the accountant needs to measure the value of the share-based payment at the grant-date and accordingly expense it over the period of vesting (Deller 2017). Nonetheless, managers and accountants’ stakes may prompt them to overlook the grant-date, thus measuring the fully vested shares incorrectly to safeguard their interests. The wrong valuing of shares may undermine the performance of the organisation since few members seek to benefit at the expense of an entire lot of shareholders (Soonawalla, Goh & Joos 2015). For example, issuing shares to managers earlier than the vested period denotes the lack of accounting standards in managing share-based payments since they are remunerated for services they have not fully rendered to the organisation. In the end, the accounting behaviour may pose financial constraints to the company, thereby undermining its profitability.

The Valuation of Awards

Moreover, the valuation of awards also needs to observe key conditions that uphold the practice of accounting standards. In this case, the estimation of share-based payments needs to uphold fairness. Importantly, the incorporation of an option-pricing model is identified as relevant towards ensuring the fair valuing of awards granted to directors and managers (Ali, Akbar & Ormrod 2016). The option-pricing model needs to be in line with the acceptable standards of valuing financial instruments. The inputs of the option-pricing model need to take into account at least six expectations ranging from the life of the alternative to the risk-free interest rate. By so doing, an organisation can secure an accurate valuation of the awards granted to the various beneficiaries (Collis, Jarvis & Skerratt 2017). In this respect, owing to the complexity of the awards valuation process, the organisation may secure the services of external professionals. The approach is crucial towards ensuring that accountants in the organisation can inaccurately value shares in line with their interests.


The IFRS standards offer a framework that requires accountants to embrace professionalism in their line of work. Nonetheless, the PAT predicts that accountants can embrace behaviours that safeguard their self-interest. In some instances, self-interest is manifested in the area of share-based payments where accountants record earnings expected in the future in the current financial books to be granted awards. The situation is worrying since it undermines the professionalism of the accounting field. Thus, there is the need for the integration of models that guide award valuation processes in an organisation to foster accountability and performance.

Reference List

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Collis, J, Jarvis, R & Skerratt, L 2017, ‘The role and current status of IFRS in the completion of national accounting rules–evidence from the UK’, Accounting in Europe, vol. 14, no. 1, pp.1-13.

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Melis, A, Gaia, S & Carta, S 2015, ‘Directors’ remuneration: a comparison of Italian and UK non-financial listed firms’ disclosure’, The British Accounting Review, vol. 47, no. 1, pp. 66-84.

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Steps And Challenges Of Action Learning

The Main Areas of Improvement

Previous case assignments have shown that there is a substantial communicative deficiency in coworker relationships. Not only do the team members interpret differently the same instructions, but they also argue about the correct course of action. The resulting disagreements lead to infighting, mistrust, and low work efficiency. Subsequently, communication is the first major area, which should be improved. It is essential that colleagues maintain honest and open communication for cultivating team spirit. Without reliable input from peers, coworkers start overvaluing their own efforts and underestimating the input of others. Correcting communicative issues is vital for establishing a healthy and efficient work setting.

The second main problem surfaces each time new workers arrive. There is a certain bias towards the more experienced employees. This predisposition puts newcomers at a disadvantage, which manifests itself in the lack of peer support and inadequate treatment. As a result, new workers are not able to adjust to the work setting properly and are forced to work extra hours in order to reach the work output indicators comparable to more experienced colleagues. Such a biased attitude reveals the staff’s deep insecurities about newcomers. At the same time, having new people with fresh input may be beneficial to the organization and the work process, even though the coworkers refuse to recognize this possibility.

The use of digital technology is one more area that hinders the work process and should be addressed. All coworkers have access to various social networks to communicate with each other. Yet, management does not have a central corporate service for virtual interactions within the organization. As a result, coworkers have to rely on different messengers to receive news. This inconvenience creates the possibility of employees not being aware of immediate work updates. Subsequently, workers are not aware of the new instructions and fail the assigned tasks. Agreeing on using a single messaging network would allow all employees to receive news on time and keep track of any work developments.

Action Learning Program Improvements

The ascertained issues can be resolved with an action learning program. An essential component of it is taking actual steps to resolve them. The entire purpose of action learning is to put the priority on practice and distinguishing the most efficient results. Pedler and Abbott (2013) write that in order to achieve it, strong moral principles have to be abided by. Therefore, the major point that an action learning program should accentuate is nurturing decent behavior among coworkers. Having a substantial moral foundation will allow directing efforts in the appropriate direction.

First, low communicative efficiency can benefit from an action learning program. At the core of interpersonal misunderstanding among coworkers lies the lack of respect. Workers do not trust each other enough to express their worries openly and pinpoint each other’s mistakes. An action learning program would help by forcing colleagues into communication. For instance, management can make peer feedback obligatory, which is an action. By checking the integrity of employees’ words, they may show appreciation of their subordinates’ honesty with financial bonuses, which incentivizes them to express themselves openly.

The second area is a bias towards the newcomers in favor of the more experienced personnel. It is important to understand that professional insecurity propels negative feelings of anxiety, apprehension, and nervousness when dealing with people who may possibly exceed one’s performance (Hain et al., 2011). Therefore, an action learning program can change this status quo by making regular assessments of the whole team’s work output regardless of the work experience. Evaluating the employees’ performance is an action while cultivating the sense of collective responsibility for work results is a moral lesson. As a result, the differences in work experience should cease to be a point of contention.

Finally, the lack of a single network for messaging can also be resolved by implementing action learning. In this case, the action would entail instructing all workers to use one specific messenger. Management can also encourage employees to share news updates with each other regularly. Having all team members use a single network will help build the collective spirit and nurture a sense of belonging. The subsequent understanding that all workers are part of a larger initiative is another moral lesson to be gained from action learning.

Organizational Readiness for Action Learning Quiz Results

Pedle and Abbot’s “Organizational Readiness for Action Learning” quiz has confirmed the aforementioned problems. Communication, biased attitude, and system of news delivery constitute weak sides of the organization. Moreover, the same issues compromise its readiness to engage in an action learning program. In order for educational endeavors to be successful, employees have to be willing to learn together (Davidson & Schwarz, 2011). This is not the case in this work setting, where there is a deficit of mutual understanding.

In my opinion, the quiz results accurately portrayed the current situation in the organization. Specifically, I agree with the notion of the lack of interpersonal respect. This will likely prove to be the biggest challenge in implementing an action learning program. As most of the coworkers do not associate themselves with the larger collective effort, there is no willingness to learn as a team. Although it may produce different results, an action learning program is still needed to be implemented.

Designing an Action Learning Program in a Workplace

In order for any type of learning to be successful, there has to be the willingness of all sides to deepen their knowledge and sharpen their skills. The deficit of trust is the problem the action learning program will work on. The choice of a problem is explained by the importance of honest communication in the work output. The set will encompass all employees who directly participate in the work process. Those who are not part of the organization will not be included because the goal is to nurture corporate culture, which comprises specific people within the organization.

The learning group will have to meet twice a week, which is the appropriate amount of time for the information to be understood. The implementation steps themselves include gathering all employees, accentuating the importance of collective effort and mutual trust, and informing them of the necessary changes. First, all work performed will be evaluated based on the overall team results. Second, all employees will be required to use a single network and update their colleagues on the news. If these undertakings are successful, the coworkers will change their attitude toward each other and see themselves as part of one organization. Combined with the use of a single network and the evaluation based on team performance, the organization will likely operate with more efficiency and integrity.


Davidson, A., & Schwarz, D. (2011). Creative approaches to continuous development. In J. Passmore (Ed.), Supervision in coaching: Supervision, ethics and continuous professional development (pp. 217-230). Kogan Page.

Hain, D., Hain, P., & Matthewman, L. (2011). Continuous professional development for coaches. In J. Passmore (Ed.), Supervision in coaching: Supervision, ethics and continuous professional development (pp. 193-226). Kogan Page.

Pedler, M., & Abbott, C. (2013). Facilitating action learning: A practitioner’s guide. McGraw-Hill Education.

Consumer Decision-Making Process In The Automobile Industry


Vast literatures suggest that numerous environmental problems occur due to human economic activities. These activities, as Transport Technologies and Policy Scenarios to 2050 (2007) asserts, cause deposition of masses of pollutants into the environment to the extent that they destroys the natural beauty. In addition, economic activities consume enormous amount of natural resources, leading to their depletion. This nuisance breeds harms that entail global warming, loss of biodiversity, climatic changes, as well as pollution to the environment. Due to the Sky rocketing cost of fuel for running engines and need to protect the environment, green cars plays a crucial role in automobile purchase. Even though evidence indicates that most of the studies are geared towards lessening pollution, only a handful describes customer’s behaviours and purchasing needs of green cars (Ramseur 2007, p. 16; Vermeir and Verbeke 2006, p. 9). This paper discus factors that influence decision-making process for customers to purchase green cars. For this reason, to measure the customers purchasing behaviour for these green cars, this research proposes the Theory of Planning Behaviour (TPB).

Green Cars

Green cars also known as environmentally friendly vehicles are cars that produce a reduced amount of pollution into the environment. In support, Baumann, Boons, and Bragd (2002, p. 412) claim that reduced pollution is purported to lessen impact of the effects to the environment as compared to the conventional vehicles that operates on combustible engines. Turrentine and Kurani (2001) state that environmentally friendly vehicles are powered by alternative fuels or operate by using advanced vehicle technology, such as use of hydrogen, compressed air, or plug-in hybrid vehicle. All these efforts aims to reduce greenhouse gas emission, air pollution or promote self-dependency on energy by reducing importation of oil for the involved state. Despite the attempt by authors to define environmentally friendly products, to date majority of both consumers and companies alike do not understand green products (Chan 2001, p. 396). Development indicates that some authors have focused not only on designing environmentally friendly products, but also emphasises on marketing of these environmentally friendly products since consumers have showed great interest and attention to them (Chen, Gillenson, and Sherrell 2002, p. 710; Hong‐Youl 2012, p. 464)

Environmentally friendly products describe the best example of the disparities that exists between consumer and companies. For instance, consumers demand for cheap fuel, and, at the same time, caring for their engines has enhanced pollution since cheap fuels pollute environment, thereby destroying the natural environment (Podsakoff, MacKenzie, Lee, and Podsakoff 2003, p. 896). However, the commonality in the two is that it is the duty of both the consumers and companies to protect the environment. This is a proof of the difficulty in striking equilibrium between the needs and desires of consumers, as well as implementing the roles of the automobile firms. To investigate the relationship between consumers’ needs and the characteristics of environmentally friendly cars, Chang (2010, p. 1393) put forward a criterion known as “SEEDS” to describe the relationship within the economic sides, aspects of demand, supply side, substitute side, and features of environmental protection. Similarly, since the environment worsens on a rapid upward move, it is evident that most consumers have recognised the effect of this problem (McAlexander, Kim, and Roberts 2003, p. 7). The companies producing green cars should utilise this to manufacture environmentally friendly cars to match the consumers’ need. This is described as design in adherence to match the consumers’ demands (Lantos, Brady, and McCaskey 2009, p. 428). The automobile firms have to conduct an inclusive market research in order to comprehend and incorporate the needs of consumers when designing the vehicles.

Engaging Consumers in Marketing of Automobile

Consumer engagement is an important aspect of relationship marketing. Vivek, Beatty, and Morgan (2010, p. 126) define consumer engagement as the passion of an individual to participate and bond with an organisation’s activities or products. Either the firm or the individual consumer can initiate this relationship. Van Doorn et al. (2010, p. 256) and Aronson, Wilson, and Akert (2003) agree that the coexistence entails behavioural, cognitive, social, and emotional elements. The phenomenal of engaging consumers is a rather a new idea in the marketing literature. However, the phenomenal has drastically risen to become so popular. The rise is attributed to the discovery of the attention and impact that direct engagement of consumers have to the industry. Coupled with the increase in competition, this strategy has a key role in enhancing a firm’s performance. Moreover, direct engagement of consumers awakens awareness about new products in the market (Lusch and Vargo 2006, p. 286). At the same time, direct engagement with customers enlightens the end-users on the superiority of one’s products over others.

Sprott, Czellar, and Spangenberg (2009, p. 96) accentuate that to explain the behaviour of customer far above just business deals and acquisition of products or a company’s services, the firm is obliged to engage its customers. Unlike it was in the past where the company only focused on transaction relationships for their products, in the contemporary society, focus of marketing has shifted from one centred on products to rather marketing that is centred on customers (Schau, Muniz, and Arnould 2009, p. 47). This change has erased the perception of considering consumers as passive recipient to active factors of trade. This shift makes consumer the valuable objects of trade. According to Van Doorn (2011, p. 282), this shift has broadened marketing strategies, forcing marketers to analyse the consumers’ behavioural intentions.

Consumers Decision-Making Process

Continually, consumers make decisions that regard to choices, use, and purchase of both products and services. The decisions made by the consumers are of significance to both these consumers and to the entire business fraternity (Roy, Butaney, and Bhutaney 2009; Phillips, Holley, Bates, and Fresstone 2002, p. 27). Since there is always a wide range of options before making decisions, this presents a challenge to both consumers and companies. This complexity in understanding consumers’ decision-making has provoked curiosity amongst researchers of consumer science and business experts alike (Price 2001, p. 337; Iwasaki and Havitz 2004, p. 45). This has seen them examine the key considerations of consumer in making decision. As evidenced, most of the research works approach their analysis from an economic perspective, thus their focus is on the purchase act. From this perspective, the researchers utilise the utility theory to understand consumer decision-making process. The utility theory as understood proposes that consumers make decisions in reference to the perceived outcomes of their decisions (Day 1999).

Theory of planning behaviour (TPB) model

The Theory of Planning Behaviour emerged in response to a theory that existed in which they have close connection. This was the Theory of Reasoned Action (TRA) (Kumar 2012, p. 28) indicates that in the theory of reasoned action, an individual’s intention is the main point to influence their behaviours. Hence, the behaviour of a consumer is evaluated from the frequent they involve in such actions. This theory assesses the intention of consumer by analysing the consumers’ attitude and subject of norm. In this, determination of intention by use of attitude encompasses the entire evaluation of behaviour. It includes salient beliefs that entail the professed likelihood of reactions for such specific behaviour in comparison to factual reactions for the behaviour (Armitage and Conner 2001, p. 473). The determination of behaviours by use of subjective customs is understood as the pressure that comes from the surrounding environment. Concisely, theory of reasoned action seemed to work in quite a number of situations, however, empirical research determined that TRA is limited to deal with behaviours that are totally under the consumers’ volitional control. Responding to the named limitation, a theory of planned behaviour was proposed (Feng 2007, p. 328). According to Kaiser (2006, p. 74), the Theory of Planned Behaviour was intended to deal with behaviours that did not fall under consumers’ complete volitional control.

The Theory of Planned Behaviour model has numerous similarities with the TRA with exception of an additional perceived behaviour control to its model. This perceived behaviour control synthesises the simplicity or complexity for an individual to execute behaviour. Richarme (2005) points out that perceived behaviour control involves availability of essential skills, accessibility to resources and chance for performing behaviour. All these as subjective to apparent possibility for the action to ease or hinder the behaviour entails the perceived behaviour. This theory purport that the perceived behaviour control determines consumers intentions as well as the individual’s behaviour directly, making it gain abundant support in predicting abundant range of intention (Schiffman and Kanuk 2000).

Determined to understand the link between belief formation and background of intention, many of the researchers and scholars alike have scrutinise approaches to vanishing attitudinal beliefs (Ajzen 2002, p. 667).On one hand, some of these scholars claim that the component of belief that can be recognised can never be organised into a solitary conceptual (Buchanan 2008, p. 211). On the other hand, some scholars have determined that in the Theory of Planned Behaviour, normative, attitudinal as well as control beliefs are vanishing as a multidimensional belief formation is taking over. Jonathan (2007) affirms that, in relation to innovation theory of TPB model, attitudinal beliefs contains three innovation characteristics that are likely to manipulate behavioural intentions of an individual. These three characteristics are relative advantage, compatibility, and complexity. Considering the intention and objectives for the development of green technology, this technology should be regarded as service innovation (Understanding how Individuals Make Travel and Location Decisions 2008). Thus, discussing consumer decision making, this study suppose that Theory of planned behaviour model exclusively elaborates the behavioural intention for consumers to prefer environmentally friendly cars.

Aboelmaged (2010, p. 404) establishes that TPB model expounds on TRA model’s failure to account for circumstances where individual consumers cannot completely control their behaviour intentions. In this, TPB claims that the concrete action of purchasing is determined by not only one factor, but both the behavioural intentions as well as the capability to control the behaviour. In the behavioural intention, personal preference and wish influences consumers’ ultimate choice. This is commonly in the TRA, whereas TPB integrates the perceived behavioural control (Verhoef, Reinartz, and Krafft 2010, p. 248). In the TPB that utilises the perceived behavioural control, a consumer does not analyse the two factors, but numerous issues before making the actual purchase. Amongst the factors to consider in TPB are the numbers of resources and opportunities available to the consumers, the challenges they might face in using the product as well as the environmental impact of using the product (Ha and Swinder 2012, p. 463). This confirms that TPB model elaborates the consumers’ behavioural intention in purchasing green cars.

Behavioural intention is the first and major point in consumer decision-making process. In this face of the purchase, the product is wholly rooted into a consumer’s mind (Lusch 2007, p. 265). As a result, the consumer develops an intimate connection with product making them always opt for the product. For the manufacturers of green cars, to entice consumers and influence their decision-making, the firms should establish a model that enlightens the consumers on the benefits of green cars. This should include benefits to both to the individual and the environment. To propose this model, it is necessary to understand that different people have different attitudes that are influenced by various factors. Despite these differences, Chung (2006) notes that each person uses his/her own attitude to devise his/her likes and wants. However, common aspects that have great impacts on an individuals’ behavioural attitude include knowledge, characteristics of product, personal attitude, and the norm surrounding the individual.


According to this study, consumers’ decision-making process follows a sequential process. To understand these sequences, the company must understand the consumers’ behavioural intention. These behavioural intentions can only be examined by engaging the end-users effectively. Notably, engagement of consumers starts at the cognitive level since it is more associated to the consumers’ emotional behaviour. Tactically, to understand behavioural intentions of consumers, scholars have varied theoretical models in this subject. Based on the forces in this field, environmentally friendly cars as a new technology, which its invention was in response to both the consumers and companies demand would preferably succeed by deploying the TPB model.


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