Question

1. Pittard Collectibles (PC) makes all sales under terms of FOB delivery point. The firm usually receives orders for sales approximately one week before delivering inventory to customers. For orders received late in June, owner Karen Pittard decides when to deliver goods. If profits are already at an acceptable level, Pittard delays delivery until July, the next financial year. If profits for the current year are lagging behind expectations, Karen delivers goods during June. As PC’s accountant you have been asked if under PC’s FOB policy, this is acceptable practice of recording sales.

Question: Use the stakeholder analysis framework described in accounting information systems, to analyse if there is an ethical dilemma for Pittard with reference to accounting standards, disclosure and any laws applicable

Answer 1

Free On Board or FOB policy, the sale is recorded as and when the goods are shipped. As per IFRS 15, the revenue is recognized when the goods and services transferred to the customer, at the transaction price. According to stakeholders analysis in accounting information system, the business can detect and act to prevent the misunderstanding of a policy or progreamme before taking any actions. For the PC recording of sales, there is no perfect method for dealing with ethical dilemmas. If PC deliver goods until july the revenue would be recognized next year only or if the revenue earned in current year is treated as deferred to the next year, it is against the accounts rule and it will provide inconsistent profit or result. Ethical dilemma tells two ways for making the decision, first way is to evaluate the actions and take course of action morally without any problem. Second is to analyze the outcome of action and select course of action with benefit and no harm. The karn can choose any action and he need to face and accept the consequences of his action.