Die Hard Company is a pesticide manufacturer. Its sales dropped a lot this year because of new legislation that outlaw
Die Hard Company is a pesticide manufacturer. Its sales dropped a lot this year because of new legislation that outlawed the sale of many of Die Hard's chemical pesticides. In the coming year, Die Hard will have new, environmentally safe chemicals to replace these discontinued products. Sales in the next year are expected to be much higher than sales of any previous year. The drop in sales and profits appears to be a one year exception.
Still, the company president is afraid that a large drop in the current year's profits could cause a significant drop in the market price of Die Hard's shares, and could make the company a takeover target. To avoid this possibility, the company presient urges Carole Chiasson, the controller, to accrue all possible revenues and to defer as many expenses as possible when preparing this period's December 31 year-end adjusting entries. He says to Carole, "We need the revenues this year, and next year we can easily absorb expenses deferred from this year." Carole did not record the adjusting entries until January 17, but she dated the entries December 31 as if they were recorded then. Carole also did everything possible to follow the president's request.
(a) Who are the stakeholders in this situation?
(b) What are the ethical considerations of (1) the president's request, and (2) Carole's decision to date the adjusting entries December 31?
(c) Can Carole aggressively accrue revenues and defer expenses and still be ethical?