Many tobacco companies have paid billions because of smoking-related illnesses. One example, British American Tobacco (BAT),...

Many tobacco companies have paid billions because of smoking-related illnesses. One example, British American Tobacco (BAT), a leading cigarette manufacturer, paid more than $2,000,000,000 in settlement payments in one year.

Required:

Assuming that you are the chief financial officer (CFO) responsible for the financial statements of BAT. What ethical issue would you face as you consider what to report in your company’s annual report about the cash payments? What is the ethical course of action for you to take in this situation?

What are some of the negative consequences to BAT for not telling the truth? What are some of the negative consequences to BAT for telling the truth?

Expert Solution

Ethical Issue : The CFO would face the ethical issue to correctly report the cash payments made for more than $2,000,000,000 towards smoking related issues in financial statements over several years instead of reflecting such amount in financial statement of one year to lower its negative impact on the financial statements.

Ethical Course of Action : Cash payments of such magnitude need to be ethically reflected in financial statements. Such amounts should be reflected in annual report accurately to present fair scope of company's Profit and losses . CFO should reflect the correct amount over the relevant period of time.

Negative Consequences for not telling the truth : It would amount to unethical business practices and it consequences shall be Higher penalty / taxes to be paid. It shall also amout to fraudlent financial reporting and overstating the revenues and assets on the financial statement in orxder to minmize the impact of cash payments.

Negative Consequences for telling the truth : Securities & Exchange Commission Actions that may result in financial penalties and Law suits

ekkarill92 answered 1 year ago

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