(c) Mordern Technology Alabata Limited plans to upgrade its production process and the directors believe that...
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(c) Mordern Technology Alabata Limited plans to upgrade its production process and the directors believe that technology-led production is the only feasible way to remain competitive in recent times. However, the company operates from a leased property and the leasing arrangement was established in order to maximize taxation benefits. Surprisingly, the financial statements have not shown a lease asset or liability to date. A new financial accountant joined Modern Technology Alabata Limited just after the financial year end of 31 July 2016 and is currently reviewing the financial statements to prepare for the upcoming audit and to begin making a loan application to finance the new technology. The financial accountant believes that the lease relating to both the land and buildings should be treated as a finance lease but the finance director completely disagrees. The finance director does not wish to recognize the lease in the statement of financial position and as a result wishes to continue to treat it as an operating lease. The finance director believes that the lease does not meet the criteria for a finance lease, and it was made clear by the finance director that showing the lease as a finance lease could adversely affect the loan application. Required: Discuss the ethical and professional issues which face the financial accountant in the above transaction. (c) Mordern Technology Alabata Limited plans to upgrade its production process and the directors believe that technology-led production is the only feasible way to remain competitive in recent times. However, the company operates from a leased property and the leasing arrangement was established in order to maximize taxation benefits. Surprisingly, the financial statements have not shown a lease asset or liability to date. A new financial accountant joined Modern Technology Alabata Limited just after the financial year end of 31 July 2016 and is currently reviewing the financial statements to prepare for the upcoming audit and to begin making a loan application to finance the new technology. The financial accountant believes that the lease relating to both the land and buildings should be treated as a finance lease but the finance director completely disagrees. The finance director does not wish to recognize the lease in the statement of financial position and as a result wishes to continue to treat it as an operating lease. The finance director believes that the lease does not meet the criteria for a finance lease, and it was made clear by the finance director that showing the lease as a finance lease could adversely affect the loan application. Required: Discuss the ethical and professional issues which face the financial accountant in the above transaction. (c) Mordern Technology Alabata Limited plans to upgrade its production process and the directors believe that technology-led production is the only feasible way to remain competitive in recent times. However, the company operates from a leased property and the leasing arrangement was established in order to maximize taxation benefits. Surprisingly, the financial statements have not shown a lease asset or liability to date. A new financial accountant joined Modern Technology Alabata Limited just after the financial year end of 31 July 2016 and is currently reviewing the financial statements to prepare for the upcoming audit and to begin making a loan application to finance the new technology. The financial accountant believes that the lease relating to both the land and buildings should be treated as a finance lease but the finance director completely disagrees. The finance director does not wish to recognize the lease in the statement of financial position and as a result wishes to continue to treat it as an operating lease. The finance director believes that the lease does not meet the criteria for a finance lease, and it was made clear by the finance director that showing the lease as a finance lease could adversely affect the loan application. Required: Discuss the ethical and professional issues which face the financial accountant in the above transaction. (c) Mordern Technology Alabata Limited plans to upgrade its production process and the directors believe that technology-led production is the only feasible way to remain competitive in recent times. However, the company operates from a leased property and the leasing arrangement was established in order to maximize taxation benefits. Surprisingly, the financial statements have not shown a lease asset or liability to date. A new financial accountant joined Modern Technology Alabata Limited just after the financial year end of 31 July 2016 and is currently reviewing the financial statements to prepare for the upcoming audit and to begin making a loan application to finance the new technology. The financial accountant believes that the lease relating to both the land and buildings should be treated as a finance lease but the finance director completely disagrees. The finance director does not wish to recognize the lease in the statement of financial position and as a result wishes to continue to treat it as an operating lease. The finance director believes that the lease does not meet the criteria for a finance lease, and it was made clear by the finance director that showing the lease as a finance lease could adversely affect the loan application. Required: Discuss the ethical and professional issues which face the financial accountant in the above transaction.
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