Pringles Ltd is a large department store that has used the straight-line depreciation method since the company was first formed. For the year ended 30 June 2015, the company make a record profit and management expected these high profits to continue at least into 2016 and 2017, although economists were originally predicting an economic slowdown and a subsequent fall in profits in 2018 and 2019.
The general manager, Peter Pringle, approached the accountant, Marion Mason, and asked her if she could find a way to reduce the profit in the next couple of years and transfer it to 2018 and 2019 when things may not be going so well. "This would give us consistent profits over the next few years and keep our shareholders happy," said Peter.
Although Marin did not feel that Peter's reason for the change was justified, she was concerned that her contract with the company would not be renewed if she upset the general manager. After some consideration, Marion decided to change the depreciation method from the straight-line method to the sum-of-years'-digits method. Marion did not disclose this change in the notes to the financial statements as she felt that the reason given by Peter would not give a good impression.
Required:
Do Marion's actions comply with the requirements of IAS 16/AASB 116?
- 750 words.
- Include at least 4 or more references using Harvard Anglia style referencing.
- Use academic journal or related.