Question

You are the controller for a struggling company. Its operations require regular investments in equipment, and depreciation is its largest expense. Its competitors frequently replace equipment--often depreciated over three years. The company president instructs you to revise useful lives of equipment from three to six years and to use a six-year life on all new equipment. What actions do you take?

Answer 1

The given case is an example of complex corporate situation where Controllers or Managers are being called to do something which may not be right by their Superiors which may lead to Window Dressing or Financial Misrepresentation or Fraud.

Such situations shall be handled with extreme due care as a wrong step may cause losing of job even.

In the given case, President of a struggling company instructs Controller to revise the useful life of assets to reduce the Depreciation Expenses which is against the regular depreciation policy.

At the very first level,as a Controller, one must call for a TECHNICAL ASSISSTANCE AND EVALUATION of Depreciable Assets whether 6 years useful life is a achievable or not. Upon receipt of TECHNICAL REPORT, the controller shall ascertain whether the same is WITHIN THE PURVIEW OF DEPRECIATION LAWS OR LIMITS.

If the Technical Report and Depreciation Law permit the same, Controller must go ahead and implement 6 Years life Policy for Depreciation purpose.If not then he/she must submit a Report with Recommendation as to why 6 Years Life policy may not be a Right Step to the President. Even after receiving the report, President takes the same stand, then Controller must consider resigning fromthe post.