Introduction
The main ethical issues involved in this situation include a lack of full disclosure, accountability, and transparency in matters related to financial reporting. According to Steve Morgan, there needs to be more transparency in reporting the high cost of advertising in the institution. In other words, the concerned members must be more transparent in disclosing how the finances have been used thoroughly. Steve Morgan needs to comprehend how the high cost of advertising has failed to help deliver good sales in the institution.
The other major ethical issues presented in the case include the organization managers’ divergent options for engineering their management options. For example, the VP of finance argues that advertising should be reported as part of production costs. Contrary, Morgan believes that such information should be reported as expense costs of the current period. Finally, the president accepts that such cost should be presented as an inventory. All these opposing opinions aim to promote the management approaches of the different managers of the institution.
The Correct Way of Classifying the Advertising Cost
Advertising plays a critical role in the overall progress of any organization. A well-planned process based on the correct laid-down principles can deliver tremendous results. Nevertheless, the Classification of advertisements is a complex process due to several elements. As per the deduction formula, these elements include losses and expenditures usually incurred during the assessment (Laplante et al, 2019). Therefore, the provision of reasonable standards for understanding the concept is critical for the ideal Classification.
According to the Income Tax Act 58 of 1962, advertising costs should be classified as capital or revenue. The above Classification is critical since it will help determine the nature of the cost incurred by such expense. American Generally Accepted Accounting Principles (GAAP) accept that advertising should be classified as capital or revenue. The main reason the idea has been taken to organize the concept in the above areas is the expectation of changing the institution’s assets or liabilities.
The Stakeholders in the Scenario
The main stakeholders in the scenario are Steve Morgan, the Managers for the financial departments, and the Controller for the institution. Steve Morgan is regarded as a critical stakeholder of the institution since his presence takes care of the key issues of the institution. In the best interest, the managers and the financial controller are expected to take care of the firm’s overall economic progress and development. That means all these key players are regarded as critical for achieving the best results.
What to do if I Were Steve Morgan
If I were Steve Morgan, I would operate differently to ensure I achieve the expected results in the institution. I guarantee that every aspect of the financial report is provided accurately with minimal errors. I would insist on using the correct principles while reporting advertisement and other critical issues that continue to affect the firm’s progress. As a leader, I would also work to harmonize the right approach of classifying advertisement in the institution. I would ensure that every member accept these standards to ensure that they do not cause any form of confusion. I would further use my outstanding leadership abilities to ensure that I direct the firm toward achieving the right results in both the short and long term.
References
Laplante, S. K., Skaife, H. A., Swenson, L. A., & Wangerin, D. D. (2019). Limits of tax regulation: Evidence from strategic R&D classification and the R&D tax credit. Journal of Accounting and Public Policy, 38(2), Pp. 89-105. Web.