AOL focused on satisfying their needs when they decided to do what they did. They wanted to report profits so that shareholders would not see that they had had losses for 8 consecutive periods. Rules and authority were only important to them if they satisfied their needs. If AOL was in stage 3, it would be more likely to be honest with others. Not only would they be motivated by the rules, but they would try to do what is in the best interests of others, such as their stakeholders. If AOL had been at this stage, it probably would have reported the advertising costs as an expense, even though it would have been a detriment to the company. Even if AOL were at stage 4, it would be doing the right thing by reporting costs as expenses. The stage 4 level emphasizes the morality of law and duty to social order. AOL believes it is its duty to report costs as an expense because it is in the company's best interests. Finally, if AOL were at stage 5 reasoning, it would be motivated by upholding the company's fundamental rights, values, and legal contracts. AOL should analyze the costs and benefits of reporting costs as an activity versus reporting as an expense. They should come to the decision that reporting the costs as expenses would be the best outcome for the company and would cause the least