Ethics and Governance
Pringles ltd is 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 made a record profit and management expected these high profits to continue at least into 2016 and 2017,althoughts economist were generally predicting an economic slowdown and a subsequent fall in profits in 2018 in 2019.
The general manager, Peter Pringle, approached the accountant, Marion Mason and asked her” if she could find a way to reduce the profit next couple of years and transfer it to 2018 and 2019 when things may not being going so well. This would give us consistent profits over the next five years and keep our shareholders happy”. Said Peter
Although Marion did not feel that peter reason for the change was justified, she was just 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 for 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.
Do Marion’s action comply with the requirement of IAS 16/AASB 116?
Maximum words 850 words in total Answer + Conclusion
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