Communication Case Essay

802 WordsSep 30, 20134 Pages
Ethics Case 4-7 – Income Statement Presentation of Unusual Loss Requirement The Cranor Corporation suffered $10 million in expenses linked to a product recall. The company had endured product recalls in the past and they still occur in the business. To show revenue from continuing operations, Jim Dietz, the controller, wishes to describe the $10 million as an extraordinary loss, instead of an expense included in operating income. He states to the CEO that the company 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 order for Jim to categorize the loss as an extraordinary item, he must view that the losses in the company’s financial…show more content…
Is the obligation of Jim and the CEO to maximize income from continuing operations, the company’s position on the stock market and management bonuses stronger than their obligation to fairly present accounting information to the users of financial statements? If they decide to go with Jim’s suggestion, it would be misleading to the shareholders and creditors about the lost suffered. The misrepresenting of the stakeholders and money market would be sinful and display wickedness, while if the corporation is straightforward with the market and shareholders it will demonstrate moral values and show that the corporation is working in the best interest of the investors by not misleading them when it comes to losses. In Exodus 23:1-2 it speaks about bearing a false report. The New International Version states: “Do not spread false reports. Do not help a guilty person by being a malicious 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 supposed to take the charge for the preparation and fair presentation of the
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