Bill Gates, the manager of a large division of a major corporation, has significant input to...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Bill Gates, the manager of a large division of a major corporation, has significant input to accounting policy for the division and has authority over all line decisions, including purchasing, maintenance, and capital expenditures. The manager has occupied the position for three years; the average time for promotion to the corporate staff level is five years. The manager has successfully endorsed capitalizing all post-acquisition costs, including improvements and general maintenance and repair. His justification is that all maintenance increases the useful life or productivity of assets relative to lower levels of such costs. In addition, he has recommended postponing many routine repairs on equipment used in manufacturing the division's product. Furthermore, he has resisted requests from lower managers to upgrade and expand facilities in several important areas. Divisions are evaluated on rate of return on investment (ROI), the ratio of divisional income to divisional investment. Ethics Case Example Two: The executive management team for a waste management firm was charged by the Securities and Exchange Commission for financial fraud. Among other things, management was found to have avoided recognition of depreciation expense on equipment by assigning inflated salvage values to the equipment and extending their useful lives. The updated salvage values and useful lives are unrepresentative of estimates chosen by most firms in the industry. Required Write a one-page report addressing the ethical factors relevant to the example above of financial reporting and disclosure. Comment on the propriety of the accounting chosen, GAAP flexibility, and the degree to which un- derlying economic effects are disclosed. Bill Gates, the manager of a large division of a major corporation, has significant input to accounting policy for the division and has authority over all line decisions, including purchasing, maintenance, and capital expenditures. The manager has occupied the position for three years; the average time for promotion to the corporate staff level is five years. The manager has successfully endorsed capitalizing all post-acquisition costs, including improvements and general maintenance and repair. His justification is that all maintenance increases the useful life or productivity of assets relative to lower levels of such costs. In addition, he has recommended postponing many routine repairs on equipment used in manufacturing the division's product. Furthermore, he has resisted requests from lower managers to upgrade and expand facilities in several important areas. Divisions are evaluated on rate of return on investment (ROI), the ratio of divisional income to divisional investment. Ethics Case Example Two: The executive management team for a waste management firm was charged by the Securities and Exchange Commission for financial fraud. Among other things, management was found to have avoided recognition of depreciation expense on equipment by assigning inflated salvage values to the equipment and extending their useful lives. The updated salvage values and useful lives are unrepresentative of estimates chosen by most firms in the industry. Required Write a one-page report addressing the ethical factors relevant to the example above of financial reporting and disclosure. Comment on the propriety of the accounting chosen, GAAP flexibility, and the degree to which un- derlying economic effects are disclosed.
Expert Answer:
Answer rating: 100% (QA)
Ethical Factors in Financial Reporting and Disclosure The scenarios presented highlight crucial ethical considerations in financial reporting and disc... View the full answer
Related Book For
International Marketing And Export Management
ISBN: 9781292016924
8th Edition
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr
Posted Date:
Students also viewed these accounting questions
-
The Crazy Eddie fraud may appear smaller and gentler than the massive billion-dollar frauds exposed in recent times, such as Bernie Madoffs Ponzi scheme, frauds in the subprime mortgage market, the...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Swish Designs specialises in designing commercial office space in Auckland. The CEO, Ralph Polo has reviewed the financial results and has noticed that operating profits were below budget. He also...
-
Write three resonance structures for (a) The cyanate ion (NCO2) (b) The isocyanate ion (CNO2). In each case, rank the resonance structures in order of increasing importance.
-
Distinguish between beliefs, attitudes, opinions and interests. Explain the elements of culture that are likely to be important in any given situation using examples to illustrate.
-
You drop a ball from rest from a window \(12 \mathrm{~m}\) above the ground, and just before it hits the ground its speed is recorded to be \(14.6 \mathrm{~m} / \mathrm{s}\). What percentage of the...
-
Filkins Fabric Company is considering the replacement of its old, fully depreciated knitting machine. Two new models are available: Machine 190-3, which has a cost of $190,000, a 3-year expected...
-
Firms do not know if they are safe or dangerous before they buy insurance. What would be the minimum price you, as a risk manger would sell insurance at and why?
-
Marc and Mikkel are married and file a joint tax return. Marc and Mikkel earned salaries this year of $65,100 and $18,600, respectively. In addition to their salaries, they received interest of $372...
-
A simple approach for finding ultimate BOD (L) involved daily measurements of BoDe A straight line is fitted to a plot of BOD VS BOD on a graph paper sheet and the intersection point of that line...
-
You invest in a three-year bond with a coupon of 7% at a price of 98.5%. What is your income yield? (2) - You hold a corporate zero-coupon bond which matures (at 100%) in two years. The company pays...
-
WACC and Optimal Capital Structure F. Pierce Products Inc. is considering changing its capital structure. F. Pierce currently has no debt and no preferred stock, but it would like to add some debt to...
-
Senior Bank and Junior Bank both have security interests in the equipment of Faisal Electric. Senior Bank filed its financing statement first. On default by Faisal, Senior Bank hauls off the...
-
A full time school teacher recognized a $26000 loss in 2020 from his part time farming activities. What is the maximum deduction allowed in 2020 for the farm loss? Johnny Jobul is self employed and...
-
You need to write a paper about Management Accounting: Jessup Ltd Case Study
-
Let (X. A. p) be a measure space. Show that for any A,B A, we have the equality: (AUB)+(An B) = (A) + (B).
-
You are in the market for a used car. At a used car lot, you know that the Blue Book value of the car you are looking at is between $15,000 and $19,000. If you believe the dealer knows as much about...
-
You wish to hire Ron to manage your Dallas operations. The profits from the operations depend partially on how hard Ron works, as follows. If Ron is lazy, he will surf the Internet all day, and he...
-
You own a house worth $800,000 that is located on a river bank. If the river floods moderately, the house will be completely destroyed. This happens about once every 50 years. If you build a seawall,...
Study smarter with the SolutionInn App