Question

Review the following case study.

When the FASB issues new standards, the implementation date is often 12 months from date of issuance, and early implementation is encouraged. Becky Hoger, controller, discusses with her financial vice president the need for early implementation of a standard that would result in a fairer presentation of the company's financial condition and earnings.

When the financial vice president determines that early implementation of the standard will adversely affect the reported net income for the year, he discourages Hoger from implementing the standard until it is required.

Write a response of 750 to 1,050 words in which you answer the following requirements:

Determine an ethical issue that is involved in this case if any.

Identify if the financial vice president acting improperly or immorally.

Explain what Hoger have to gain by advocacy of early implementation.

Identify who might be affected by the decision against early implementation.

Format your submission consistent with APA guidelines.

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Answer 1

The FASB is the authority which develops and issues financial accounting standards through a transparent manner and inclusive process which is intended to promote financial reporting that provides many useful informations to investors and others who uses the financial reports. All the standards issued are for the implementation of the better and wide information to the investors to have a clear picture of the company's position.

So, the guidelines which FASB has issued, would be implemented as soon as possible although a period of a year is provided for its complete implementation.

Here, the company's and the executives are under the ethical boundation to implement the same because it will preserve the company of any penalties and also to gain any benefits provided on the implementation of the issued accounting standard. Its implementation will also results in fair presentation of the company’s financial results.

Under the case provided, the financial Vice-President has acted improperly or adversely by not obeying the Controller Mr. Hoger because Financial Vice President knows that implementation of the standard in the results will adversely affect te reported net income for the year and on the contrary it will affect the sentiments of the Stockholders and the prospective investors. It was also morally not a good action on the part of Financial Vice President to not to follow the senior and present actual legal position of the company’s results. Ethically the Financial Vice-President is also under the obligation to implement the accounting standards at the earliest without looking at the evils of the such implementation on Company's net income.

According to Mr. Hoger, the implementation of the Accounting Standards will fulfils the legal requirement of the Results Presentation and saves the company from any ill effects from the “Issuing Authority” and the benefits of the implimentation will be iceing on the cake. Mr. Hoger being the senior in the organisation will have the responsibility to have the implementation of the accounting standards in the company’s results as soon as possible. As the Controller is not directly concerned with finance department so he is unaware of the affecting part of the implementation.

If the decision is taken to implement the accounting standard in the company’s results and the adverse affect of the same would be observed by many parties, which includes:

1. The Stockholders : The implemented results could have a reduced earnings towards them. It could have been holding any development steps of the company.
2. The Company and its employees: The top management has to listen to the music of the Stockholders and face all the hardships towards the implementation of the accounting standard.
3. The Investors : The implemented and affected results could not be of the liking of the prospective investors and that will affect the future financing programs of the company.

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