Financial Accounting Assignment-
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 2016, the company made a record profit and management expected these high profits to continue at least into 2017 and 2018, although economists were generally predicting an economic slowdown and a subsequent fall in profits in 2019 and 2020. The CEO, 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 2019 and 2020 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 Marion did not feel 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 she decided to change the depreciation method from the straight-line method to the sum-of-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 -
Discuss the ethical and governance issues in changing the depreciation methods in the case above.
2500 words
8 Harvard references.