When the IASB issues new standards, the implementation date is usually twelve mo

Question

When the IASB issues new standards, the implementation date is usually twelve months from the date of issuance, with early implementation encouraged. Becky Hoger, controller, discusses with her financial vice president the need for early implementation of a standard that would result in fair presentation of the companya€™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. a. What, if any, is the ethical issue involved in this case? b. Is the financial vice president acting improperly or immorally? c. What does Hoger have to gain by advocacy of early implementation? d. Who might be affected by the decision against early implementation

Explanation / Answer

a.) What, if any, ethical issue is involved in this case?

In the current scenario the vice president does not want early implementation of the standard, although this is completely legal and as per accordance with GAAP, however it would be more ethically correct to implement that new standards earlier as it would result in a fairer presentation of the financial condition and earnings of the company although will adversely affect the reported net income

b.) Is the financial vice president acting improperly or immorally?

In my opinion financial vice president is acting immorally. The reason is that if vice president is not adopting the new standards that would be a more fairer representation and earnings of the company's financial condition, the information need to be implemented just in time, regardless of its impact on net income. Hiding the truth is never considered moral trait

c.) What does Hoger have to gain by advocacy of early implementation?

The controller must provide the company's financial information that presents the accurate financial condition, thus Hoger would want the new standards to be implemented sooner than later to ensure that the records were more accurate at the present time instead to wait the 12 months until the standards were automatically implemented. Thus should refuse the vice financial president

d.) Who might be affected by the decision against early implementation?

Potential lenders and investors, the I.R.S., Auditors, and Financial Institutions like banks because they observe the financial statements which are based on the “fair” representation of financial conditions of the company. Moreover, the stockholders might effected by such information and lost benefits

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