In: Accounting
Comfort Meals (CM) is a not-for-profit organisation that prepares and distributes meals for homeless people in Adelaide. David Cunningham, who is a member of CPA Australia, is the Chief Financial Officer for CM. On the 28th July, 2019, CM’s Chief Executive Officer (CEO) successfully negotiated a loan for $1.8 million dollars (4% per annum interest) to fund the construction of new kitchen facilities. The new facilities will be completed and ready for use in November 2020.
David is now preparing the CM annual financial statements for the year ended 30th June, 2020. The relevant accounting standards require that the interest costs associated with such a loan should be capitalised (that is, treated as an asset, part of the cost of the new facilities). The CEO has just spoken to David regarding the accounting treatment for the loan and its interest costs. In particular, he has asked David to ensure that the interest costs on the loan are all expensed in the current accounting period. The reason for the request is that CM is about to approach the government for a new round of operating grant funding. This funding is essential to ensure that CM can continue its operations in the coming year because CM is dependent on government financial support for its day-to-day activities. “Our financial operating surplus must be as low as possible for this year”, he states. The CEO goes on to say, “Preferably we should be showing a loss so that we can maximise the amount of grant funding we receive from the government. Remember, without our services, the homeless of Adelaide would be left to starve. It’s all up to you to show the right figures!”
Required:
Using the DECIDE model, explain how David should respond to this situation. You should ensure that your analysis of the case is supported by reference to the Fundamental Ethical Principles and the values of the fundamental principles of the accounting profession as specified in APES 110. Three (3) courses of action should be identified and evaluated
Insert your response to Question 2 here: Stakeholder Analysis (insert additional rows if needed):
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Discuss remaining steps of DECIDE model here:
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The following three principles can be listed for the study
they are
1. Professional behaviour
it identifies the accounting figures of the interests should be accounted from jul 28th 2019 to june 2020
2. Integrity
the report should be true, there should not contain anything as false.
3. Professional competence and due care
The statements should be prepared according to the governing regulations and the interest should be capitalised and correct steps should be followed.
we can explain that, the APES110 have the principles of fundamentals that should be followed and are intended to be followed by all professionals and at the same time the clients' performances and its employees would be evaluated to provide the best results.
The professions will be expected to works in their own interests, and a member will be carefully observed the areas related to APES100 which includes compliance with laws governing and regulations.
After the study the principle studies and evaluated based on the ethics as,
1. Professional behaviour
it regulates the professions to follow the rules and regulationseffectively. And also avoids the steps that are harmful for the professional image, and the accounting figures should be reported from july 28 2019 to june 2020 only.
2. integrity
there should not be any errors in reports by favouring any section or any advandage for procuring funds
he report should be true, there should not contain anything as false.
3. Professional competence and due care
The professionals may be expected to maintain maximum level of knowledges and skills that may help in ensuring the client and should be based on current practices followed and acting efficiently.
The statements should be prepared according to the governing regulations and the interest should be capitalised and correct steps should be followed