St. Genevieve Petroleum Company is an independent oil producer in Baton Parish, Louisiana. In February, company geologists discovered a pool of oil that tripled the company’s proven reserves. Prior to disclosing the new oil to the public, St. Genevieve quietly bought most of its stock as treasury stock. After the discovery was announced, the company’s stock price increased from $6 to $27.

Requirements

1. What is the ethical issue in this situation? What accounting principle is involved?

2. Who are the stakeholders?

3. Analyze the facts from the following standpoints: (a) economic, (b) legal, and (c) ethical. What is the impact on each stakeholder?

4. What decision would you have made?