Ethical Dilemmas

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Abstract According to the phase 2 individual project assignment instructions, each student is asked to look at two scenarios and answer the related ethical questions following each one (CTU Online, 2013). Additionally, it is asked that each student provide a discussion on the new GAAP guidelines for consolidating entities, and to provide an example of a firm that has experienced trouble for failure to comply with the GAAP guidelines. Ethical Dilemmas in Partnerships Scenario 1: In the first scenario, there are two partners in an antique business, Mr. Right and Mr. Wrong. Mr. Right manages the store, and Mr. Wrong travels and purchases…show more content…
GAAP uses to models for consolidation which are variable interest entities (VIE) and voting interest entities. A concept does not exist for a firm with less than a majority of voting rights. According to Ernst and Young (2011), another aspect of consolidation is the principle-agent evaluation in control assessment. This states that in VIEs, consolidation is based on economic considerations, while with voting interest entities there is no explicit concept. Another aspect is consideration of kick-out rights and participating rights in control assessment. In this concept “VIEs are substantive if unilaterally exercisable by a single party” (Ernst & Young, 2011). Voting interest entities are exercisable by a majority of parties. Consideration of related parties in control assessment states that VIEs have an aggregated interest of related parties and de facto agents in some cases, while no consideration exists in voting interest entities. In Investment Company accounting, the investment company records all of its investments in entities at fair value. Where there is a decrease in ownership provisions, guidance applies to non-profit activities and businesses (with or without loss of control). Scope excludes conveyances of oil and gas mineral rights, and sales of in-substance real estate. Significant events that happen between reporting dates must be included in the financial statements when different dates are used. The reporting entity and the
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