Communication Case Essay

Ethics Case 4-7 Income Statement Presentation of Unusual passRequirementThe Cranor Corporation suffered $10 zillion in expenses linked to a product back away. The company had endured product recalls in the past and they still go past in the business. To show revenue from go on operations, Jim Dietz, the obtainler, wishes to describe the $10 million as an unique loss, instead of an expense let ind in operate income. He states to the CEO that the company has never had a product recall of this size and that the partnership fixed the design flaw and improved persona control. The drawback is, in order for Jim to categorize the loss as an extraordinary item, he must view that the losses in the companys fiscal statements be unprecedented and unusual. He must also presume this answer is not promising to encounter again in the future profitability. (Spiceland, Sepe, & Nelson, 2013, p. 188) The diary of accountancy states that extraordinary items are gains and losses that ar e 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 take care the overall objective of the income statement. The key question is how the event relates to a squiffys 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 director officer is that it appears from the facts of the case that it would be difficult for the company to come to the goal that a material product recall is not likely to occur again in the foreseeable future. This type of event has occurred before and is earthy 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 and forethought bonuses stronger than their obligation to fairly present account statement information to the users of financial statements? If they judge to go with Jims suggestion, it would be tawdry to the shareholders and creditors about the lost suffered. The misrepresenting of the stakeholders and bullion market would be sinful and display wickedness, while if the corporation is transparent with the market and shareholders it will demonstrate moral values and show that the corporation is working in the trump interest of the investors by not misleading them when it comes to losses. In Exodus 231-2 it speaks about bearing a fake report.The new-fashioned internationalist Version states Do not spread chimerical reports. Do not help a guilty person by being a malicious witness. Do not follow the company 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 rushing for the preparation and fair presentation of the financial statements in accordance to the explanation policies. (Handbook of the Code of Ethics for Professional Accountants, 2013)I think the Cranor Company should include the loss in their net income and continue with the product recall. Including the loss in their net income will show honesty to its stakeholders. They may not welcome a bonus, but it is better for them to be hon est than risk the consequences of prevarication about the loss. Leviticus 1911 says, Do not steal. Do not lie. Do not deceive one another. (The Quest Study 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 bloke 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 spring up a bonus.ReferencesThe Quest Study Bible, New International Version. (1994). Grand Rapids Zondervan create House. Extraordinary Items Share Exclusive Company . (2013, September 3). Retrieved from Journal of Accountancy http//www.journalofaccountancy.com/Issues/2007/May/ExtraordinaryItemsShareExclusiveCompany.htm Handbook of the Code of Ethics for Prof essional Accountants. (2013). New York International Federation of Accountants. Spiceland, D., Sepe, J., & Nelson, M. (2013). Intermediate Accounting (7th ed.). New York McGraw-Hill/Irwin.