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Chapter 1: Question 13 CA-a (page 25)

ETHICS (Rule-Making Issues) When the FASB issues new pronouncements, the implementation date is usually 12 months from date of issuance, with early implementation encouraged. Karen Weller, controller, discusses with her financial vice president the need for early implementation of a rule that would result in a fairer presentation of the company鈥檚 financial condition and earnings. When the financial vice president determines that early implementation of the rule will adversely affect the reported net income for the year, he discourages Weller from implementing the rule until it is required.

Instructions:Answer the following questions.(a) What, if any, is the ethical issue involved in this case?

Short Answer

Expert verified

Yes, there is the involvement of an ethical issue in this case.

Step by step solution

01

Meaning of Ethical 

To be ethical is to choose between right or wrong for a given situation in the business. It helps thebusiness to gain respect in society by giving more value to ethics than profit.

02

Explanation

Yes, because including or excluding information that has a material effect on net income harms specific stakeholders. Accountants must accept the fact that their decision to implement or delay reporting requirements will have an instant effect on some stakeholders.

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Most popular questions from this chapter

Question: Which of the following statements is true?

(a) The IASB has the same number of members as the FASB.

(b) The IASB structure has both advisory and interpretation functions, but no trustees.

(c) The IASB has been in existence longer than the FASB.

(d) The IASB structure is quite similar to the FASB鈥檚, except the IASB has a larger number of board members.

Question: Economic consequences of accounting standard-setting means:

(a) standard-setters must give first priority to ensuring that companies do not suffer any adverse effect as a result of a new standard.

(b) standard-setters must ensure that no new costs are incurred when a new standard is issued.

(c) the objective of financial reporting should be politically motivated to ensure acceptance by the general public.

(d) accounting standards can have detrimental impacts on the wealth levels of the providers of financial information

(GAAP and Standard-Setting) Presented below are four statements which you are to identify as true or false. If false, explain why the statement is false.

  1. The objective of financial statements emphasizes a stewardship approach for reporting financial information.
  2. The purpose of the objective of financial reporting is to prepare a balance sheet, an income statement, a statement of cash flows, and a statement of owners鈥� or stockholders鈥� equity.
  3. Because they are generally shorter, FASB interpretations are subject to less due process compared to FASB standards.
  4. The objective of financial reporting uses an entity rather than a proprietary approach in determining what information to report.

What are some of the major challenges facing the accounting profession?

What are the sources of pressure that change and influence the development of GAAP?
See all solutions

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