When new accounting standards are issued, a required implementation date (the date when a company has to start applying the recommendation) is dictated but early implementation is also possible-even encouraged. For example, Canadian publicly traded companies were required to start using IFRS by January 1, 2011, but early adoption was permitted.
Kathy Johnston, the controller at Redondo Corporation, discussed with Redondo’s vice-president of finance the possibility of implementing IFRS early. She said it would result in a much better comparison of the company’s financial condition and profit with its international competitors. When the vice-president determined that early implementation would decrease reported profit for the year, he strongly discouraged Kathy from implementing IFRS until it was required.
Instructions
(a) Who are the in this situation?
(b) What, if any, are the ethical considerations in this situation?
(c) What could Kathy gain by supporting early implementation? Who might be affected by the decision against early implementation?
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