In June 2022, the board of directors for McElroy Enterprises authorizes the sale of 10,000,000 of company

Question:

In June 2022, the board of directors for McElroy Enterprises authorizes the sale of £10,000,000 of company bonds. Jennifer Grayson, treasurer for McElroy Enterprises, is concerned about the date when the bonds are issued. The company really needs the cash, but she is worried that if the bonds are issued before the company’s year-end (December 31, 2022) the additional liability will have an adverse effect on a number of important ratios. In July, she explains to company president William McElroy that if they delay issuing the bonds until after December 31, the bonds will not affect the ratios until December 31, 2023. They will have to report the issuance as a subsequent event, which requires only footnote disclosure. Grayson expects that with expected improved financial performance in 2023, the ratios should be better.


Instructions

a. What are the ethical issues involved?

b. Should McElroy agree to the delay?

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Related Book For  book-img-for-question

Intermediate Accounting IFRS

ISBN: 9781119607519

4th Edition

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield

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