Acc 680 Case Study

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ACC 680
Fall 2016
Final Exam
1. I choose the Tucker’s “5-question Approach” which ask you 5 questions to determine whether a behavior is ethical(cargill). The 5 questions are:

Is it profitable?
In the short-term, it is profitable. Income smoothing reduce the fluctuations in a corporation's earnings, maintaining and attracting investors(scott)

Is it legal?
It depends on the situation. Income smoothing can range from good business methods to fraudulent reporting. Some organizations use proper accounting methods under GAAP for its income smoothing, which is legal. However, some organizations may be using dubious means for hedging its income, which is illegal.

Is it fair?
No. the companies that never use income smoothing may have better better financial statement than the companies that use income smoothing. However, the companies using income smoothing mislead the stakeholder and attract more people invest them to be competitive, which is unfair. …show more content…
Present arguments that current value is more useful than historical cost.
Current value is more relevant than historical cost for decision making: The market value of current cost accounting better presents the economic reality of transactions and therefore tends to provide more useful and relevant information than does historical cost financial reporting( Nur Barizah Abu & Julia Mohd). However, historical cost valuation’s data is very old sometimes, this data does not provide the most relevant information to investors.

Current value accounting provides more realistic financial statement than historical value accounting: When using current value accounting, companies are able to exam their financial statements with actual fair values, allowing them to make wise choices for future business operations ( Jennifer Vanbaren). However, historical cost accounting methods do not take into account the possibility that an asset's value may actually be higher or lower than what is reported on company books (spphia
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