Accounting Ethics....Assignment Help Sample

Accounting Ethics

Review the following case study.

When the FASB issues new standards, the implementation date is often 12 months from date of issuance, and early implementation is encouraged. Becky Hoger, controller, discusses with her financial vice president the need for early implementation of a standard that would result in a fairer presentation of the company's financial condition and earnings.

When the financial vice president determines that early implementation of the standard will adversely affect the reported net income for the year, he discourages Hoger from implementing the standard until it is required.

Write a response of 750 to 1,050 words in which you answer the following requirements:

Introduction:

The Financial Accounting Standards Board (FASB) was established in 1973, it is an independent, Board that device new accounting standards and redesign the previous accounting practice for all private-sector, not-for-profit organization and companies for profit as well. Basic purpose of publishing new standards and refining the previous one is to make fair presentation of all the transactions held in every business. So that investor who makes their decision on the financial statement can get better view of company and make their investment related decisions accordingly. All companies are liable to follow the FASB standards and are accountable for the implementation of new standards and practices published time to time in order to facilitate the investor and lender.

·         Determine an ethical issue that is involved in this case if any.

In this case basic issue is that Becky Hogar wants to implement the standard early so that investors could get better view about the financial health of the company. This early implementation on the other hand will result in a fair presentation of the company’s financial condition and profits despite this fact that if it was implemented early the standard will adversely affects the reported net income of the company. Due to this reason Vice president doesn’t want to implement on early stage although it is required by law and according to the GAAP principals to implement as soon as possible so that investors and creditors could take better decision about the financial performance of the company. So Hogar decision was ethically and legally correct but Vice president don’t seem agree on this.

·         Identify if the financial vice president acting improperly or immorally.

According to me the financial vice president acts immorally. He is doing this consciously because he knows that implementation in fact early implementation of standard will result fair presentation about the financial performance of the company and customers as well as investors could take better view about the earnings of the company, as e result this implementation will adversely affect the reported income of the income so he is going to mislead the clients and investors by his decision not to implement the standard on early basis. He wants to hide the inner side of the company so that he could gain more investors by misleading them about the fake financial position of the company. It is not moral to do so consciously in fact it falls under the category of fraud where a person do false practices intentionally and consequently he can be penalized for his act.

·         Explain what Hoger have to gain by advocacy of early implementation.

Hogar is the financial controller and she considers herself accountable for fair presentation of the company financial statement that’s why she is advocating the early implementation but the vice president don’t want to represent the actual financial conditions of the company. In this case she does not need to follow his vice president because his decision is immoral and not according to the principles of GAAP and accounting framework.

·         Identify who might be affected by the decision against early implementation.

Financial statement is the only source for lenders and investors of the company. Early implementation of new standard will result in fair presentation of the company’s financial statement hence could present the better view of the financial health of the company. They rely on the information given in financial statement because financial statement  prepared according to the international standards of accounting and disclosure principals hence it present the fair presentation of all the financial and non financial dealing of the company. In this case if president don’t implement the new standard then potential lenders and investors will suffer because they rely on financial statement to check the earnings and stock of the company. Stockholders may also be affected by this decision of president.

When investors and lenders will make decision based on the previous practice they might b mislead about the earnings or net income of the company hence company will be liable. Its reputation will be affected badly due to wrong decision of Mr President. Potential investor will buy the shares according to the net income and share price that will be mislead hence in the end company whenever will implement the new standard will result in loss occurred due to misrepresentation of the profit figures shown in the financial statement and late implementation of new standards required by law for making fair presentation of the company accounts.