Ethics: Accounting for Obsolete Inventory. High Tech, Inc., is a public company that produces laser and ink jet printers. Jorge is an accounting staff member who works for the company's controller and is involved in preparing the annual report. One of High Tech's competitors developed a superior color laser jet printer using a less costly production process. Jorge realizes that High Tech's substantial inventory of color laser jet printers is effectively obsolete and will have to be written down to its net realizable value in accordance with U.S. GAAP. This means higher expenses and lower profits.
Jorge's boss, the controller, is aware of the situation but the chief financial officer is not. In fact, the controller told the CFO that High Tech does not have any obsolete inventory. Both Jorge's boss and the CFO receive bonuses tied to the company's profits. The outside auditors are completing the audit and are unaware of the obsolete inventory.
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How should Jorge handle this situation? Use the IMA's Statement of Ethical Professional Practice shown in Figure 1.2 "IMA Statement of Ethical Professional Practice" as a guide to answering this question.