AOL focused on meeting its own needs when it decided to do what it did. They wanted to report their profits so shareholders wouldn't see that they had suffered losses for 8 consecutive periods. Rules and authority were only important to them if they met their own needs. If AOL was at stage 3, they would have been more inclined to be fair to others. They would not only be motivated by rules, but would seek to do what is in the best interests of others, such as those of their stakeholders. If AOL were at this point, they probably would have counted advertising costs as an expense, even though it would be bad for the company. If AOL was at stage 4, they would also do the right thing by reporting the costs as expenses. Level 4 emphasizes the morality of the law and duty to the social order. AOL would feel it is its duty to report the costs as expenses because it is in the company's best interest. Finally, if AOL were at stage 5 of reasoning, they would be motivated by respect for the company's fundamental rights, values, and legal contracts. AOL should analyze the costs and benefits of reporting costs as an asset rather than an expense. They should decide that reporting the costs as an expense would be the best outcome for the company and cause the least problems.