Communication Case Essay Example for Free

Communication Case bear witnessEthics Case 4-7 Income Statement Presentation of Unusual LossRequirementThe Cranor Corporation suffered $10 jillion in expenses linked to a harvest-tide call in. The go with had endured product recalls in the past and they still materialize in the business. To show revenue from continuing operations, Jim Dietz, the controller, wishes to describe the $10 million as an special loss, sort of of an expense embarrassd in operating income. He states to the CEO that the connection has never had a product recall of this size and that the corporation fixed the design flaw and improved quality control. The drawback is, in ordering for Jim to categorize the loss as an extraordinary decimal point, he must view that the losses in the companys financial statements are infrequent and unusual. He must also presume this event is non likely to occur again in the future(a) profitability. (Spiceland, Sepe, Nelson, 2013, p. 188) The Journal of account ancy states that extraordinary items are gains and losses that are material, and result from events that are both unusual and infrequent. (Extraordinary Items Share Exclusive Company , 2013) These criteria must be considered in light of the environment in which the entity operates. There obviously is a considerable degree of subjectivity involved in the determination. The concepts of unusual and infrequent require judgment. In making these judgments, an accountant should keep in mind the overall objective of the income statement. The key question is how the event relates to a firms future profitability. If it is judged that the event, because of its unusual nature and infrequency of occurrence, is not likely to occur again, separate reporting as an extraordinary item is warranted.The ethical dilemma faced by Jim Dietz and the companys chief executive officer is that it calculates from the facts of the case that it would be difficult for the company to come to the conclusion that a material product recall is not likely to occur again in the foreseeable future. This type of event has occurred before and is harsh in the industry. While a subjective judgment, extraordinary treatment of the $10 million does not appear warranted. Is the obligation of Jim and the CEO to maximize income from continuing operations, the companys position on the stock market place and commission bonuses stronger than their obligation to fairly presentaccounting information to the users of financial statements? If they decide to go with Jims suggestion, it would be misleading to the shareholders and creditors active the lost suffered. The misrepresenting of the stakeholders and money market would be sinful and display wickedness, musical composition if the corporation is straightforward with the market and shareholders it will demonstrate moral values and show that the corporation is works in the best interest of the investors by not misleading them when it comes to losses. In Exo dus 231-2 it speaks about bearing a unreasonable report.The sweet International Version states Do not spread false reports. Do not help a guilty person by being a venomed witness. Do not follow the crowd in doing wrong. With Jim and the CEO being in a management position, they are required to perform many activities in running the entity in the best interest of stakeholders. Their duties include leading and directing an entity, including making important decisions concerning the acquisition, deployment and control of human financial, physical and intangible resources. They are supposititious to take the charge for the preparation and fair presentation of the financial statements in accordance to the accounting policies. (Handbook of the recruit of Ethics for Professional Accountants, 2013)I think the Cranor Company should include the loss in their net income and refer with the product recall. Including the loss in their net income will show honesty to its stakeholders. They ma y not gravel a bonus, but it is better for them to be honest than risk the consequences of lying about the loss. Leviticus 1911 says, Do not steal. Do not lie. Do not deceive one another. (The Quest lease Bible, New International Version, 1994) By seeing the scripture we can detect how this relates to accounting ethics. Leviticus 1911 explains that that we are not to steal, and ultimately mislead others. When we associate this verse to this ethical dilemma it would describe Jim Dietz and the company chief executive officer of deceiving the stock market into thinking that the loss was truly an extraordinary item on income statement when in reality, they are misleading them to get a bonus.ReferencesThe Quest Study Bible, New International Version. (1994). Grand Rapids Zondervan Publishing House. Extraordinary Items Share Exclusive Company . (2013, September 3). Retrieved from Journal of Accountancy http//www.journalofaccountancy.com/Issues/2007/May/ExtraordinaryItemsShareExclusiveCo mpany.htm Handbook of the Code of Ethics for Professional Accountants. (2013). New York International Federation of Accountants. Spiceland, D., Sepe, J., Nelson, M. (2013). Intermediate write up (7th ed.). New York McGraw-Hill/Irwin.