In a meeting between John Smith, CPA, the controller, and Elias Best, CFO, at a local public company, the CFO tried to persuade the controller to group 10 expenditures for repair and maintenance into a 500k fixed asset. Each of the expenses was less than 50k, which is the company's cutoff to capitalize expenditures. Then the CFO suggested that the controller take a 500k section 179 depreciation deduction on the tax return for the company because that was the limit last year. 

The controller believes that he is responsible for deciding how to record expenditures and that 500k is material to the financial statements. He believes that the accounting rules require expensing of these items, not capitalization. The controller also is aware that Congress has rolled back the 550k limit to 25k on the section 179 depreciation. The controller believes that taking a section 179 deduction of 500k is 475k more than allowed by law, and at a 21% tax rate, the company would be filing false tax returns to increase cash flow and pay less in taxes.  

 

1) Evaluate what philosophical, ethical reasoning is going on among the parties.

2) The Integrated Ethical Decision Making Process-4 steps.

3) What would you do and why (back up your actions with reasons from the textbook or scripture). 

Answer rating: 100% (QA)

The philosophical and ethical reasoning at play in this scenario involves conflicting interests and ... View the full answer