Accounting Policy & Ethics etc

Kelshall is a public limited company.The Current year end is 31 December 20X5. The Finance Director is remunerated with a profit-related bonus and share appreciation rights. (Share appreciation rights means that the directors will become entitled to a future cash payment based on the increase in the entity’s share price from a specified level over a specified period of time.

Kelshall owns a significant number of owner-occupied properties which historically have been held under the revaluation model. Recently, due to an economic downturn, property prices have been falling. The Finance Director is proposing to switch from the revaluation model to the cost model.

Shortly before the year-end, the CEO of Kelshall, who holds a large number of share options, mention to the finance director that he was hoping to retire within the next year and was hoping to maximize Kelshall’s share price by his retirement date.

Required
(a) Discuss the view that the board of directors should be remunerated with profit-related pay and share-based payment to align directors’ interest with stakeholder’s interest.
(b)Discuss whether the Finance Director of Kelshall will be acting ethically if he revised the accounting policy from revaluation model to cost model.
(c)Discuss whether the CEO’s comment to the Finance Director is ethical and what action, if any, the Finance Director should take.