Discussion Responses – Financial Accounting
Discussion Response 1
BY: E,S
The CFO has more oversight and needs to make sure areas of ethics, integrity are not questioned “He or she is the last line defense in terms of the moral compass of the company and the accuracy of the financial statements” (John Draut, 2017). These are tried and true and keep lawlessness away! With that said there are laws that allow some room to move numbers such as depreciation, and the GAAP allows equipment to be one of those areas. In my company we use this method both on a District and Regional level but with rules of engagement. To me accounting calls for more ethics and integrity and honesty than most fields. Most fields have honest people but in the Business world the CFO in my eyes is a very important and upstanding person. I believe many organizations have CFO as their CEO because of the skill set and complexities that exist today.
“Depreciation begins when a taxpayer places property in service for use in a trade or business or for the production of income. The property ceases to be depreciable when the taxpayer has fully recovered the property’s cost or other basis or when the taxpayer retires it from service, whichever happens first” (IRS Gov).
“Depreciation is an income tax deduction that allows a taxpayer to recover the cost or other basis of certain property. It is an annual allowance for the wear and tear, deterioration, or obsolescence of the property” (IRS Gov.). So in reference to changing asset life does occur occasionally, the question is if it has always been five years and the CFO wants seven years for bonus reasons I do not feel this is appropriate and feel it takes a clear cut situation to a grey area I would not feel comfortable with. Would the IRS look the other way? Could be so for legal reason you may get by, then again there are rules for equipment and if you went from seven years to five you would have to explain the reasoning and tie it to the industry potentially.. What would I do? I would find other areas to generate the $750K they are looking for. The grey area doesn’t make me comfortable and there has to be other areas to generate revenue to gain the bonuses such as safety, turnover, overtime, double shifting, hiring etc. Not knowing the company or the business there generally are cost cutting initiatives that can help offset cost.
Side note: Last two weeks we have discussed Fraud and Ethics—-Have you heard about the FBI investigation of NCAA Basketball programs tied to shoe manufactures? Do you think anyone in the accounting departments knew about the large sums being paid out? College sports are big business, and the corruption continues to amaze me.
