Acquisition Analysis And Consolidated Adjustments Essay.

The given case is developed with reference to a particular corporation referred to as Sunshine Limited where general manager (GM) Kam Sunshine has come up to the accountant that is Mars. However, the purpose was to carry out certain alterations in the incoming profit of the corporation separately. Essentially, this has led to dilemma of Maria Mars since she is concerned regarding renewal of her agreement with the corporation. Despite understanding the fact that the activities are unethical, Maria has altered the mechanism of depreciation from essentially the straight-line mechanism to the sum-of-years mechanism. Therefore, specific stakeholders recognized in the given scenario includes shareholders, governments as well as communities, clients, partners, diverse suppliers, professional accountants, creditors and general manager. Again, ethical issues that have been debated and the notions that the corporation has violated essentially include inadequate transparency, honesty and breach of objectivity. To finish, specific role of Maria in altering the depreciation mechanisms has been debated aligned to diverse requirements of the organisational requirements in addition to influence of AASB 116.

As correctly put forward by Deegan (2013), ethics as well as governance is all about values and morality. In essence, the ethics as well as governance can be regarded to be core constituent of knowledge as well as skill base of professional accountants. Being makers of business decision, accountants need to be proficient in different regulatory regimes, different compliance obligations as well as governance mechanisms in order to make certain lawful as well as effective corporate behaviour as well as functions (Beatty and Liao 2014). However, the following are certain issues that can be associated to ethics as well as governance of Sunshine Limited.  

As rightly indicated by Edwards (2013) shareholders of a corporation have the authority to know regarding the profitability from their specific investments. As such, the primary purpose of the management is to maintain reliability as well as transparency in the financial pronouncements for the advantage of both investors as well as analysts. However, grounded on alterations to profitability on investments, the shareholders also have the right to decide whether to retain the shares of the corporation. In addition to this, in a bid to gratify shareholders of the company Sunshine Limited, Kam has suppressed the fact of transformation of mechanism of depreciation for creation of illusion of an even as well as higher level of profit. However, this in turn replicates the fact that there is lack of clearness as well as integrity on part of the firm Sunshine Limited in reflecting appropriate information to all the users of financial information.  In accordance with prior data, the presence of transparency as well as reliability in financial declarations can be associated to accounting standards, different ethical exercises, and internal as well as external controls, along with corporate governance.

As per the given case, the general manager (GM) of the company Sunshine Limited has essentially ill-treated senior management of the corporation  for certain personal advantages and the professional accountant has assisted the specific individual in attaining the same. In addition to this, the business concern has utilized diverse mechanisms for calculation of depreciation on different fixed assets for depicting the influence of devaluations as well as mechanisms of depreciation that can replicate the circumstance in which benefits of the future are anticipated to be incurred (Beatty and Liao 2014). In essence, Maria has altered the entire mechanisms, which can lead to variance in overall timing of the entire depreciation. Owing to this, the shareholders’ decision might perhaps be influenced from the real decisions by different approximations of error. In essence, the professional accountant is responsible to represent different accounting information in an effectual manner and any alteration in the financial pronouncements need to be declared. However, this is against the working ethics of professional accountants that can breach the objectivity notion (Beatty and Liao 2014).

As per the given case study, it can be hereby stated that Maria Mars decided to transform the entire mechanism of depreciation from straight-line method to specifically the sum-of-years-digits mechanism. However, the main purpose as well as intention of utilizing the sum of the year’s mechanism can be to minimize the overall profit level in the next two years for transferring the profit to the year 2018 and 2019 to fight with the expected economic slowdown. In actual fact, this can be illustrated utilizing the following instance:

The comparison between profits utilizing two mechanisms of depreciation is presented below: 

However, with alteration in the method of depreciation, the total amount of depreciation might increase particularly in the beginning of the year and tend to decrease in the subsequent years. In essence, this can help in maintaining profits at a constant level through the years because of minimization of depreciation during the period (Henderson et al. 2015). Therefore, Maria Mars has played a vital part in the process of altering the mechanism of depreciation for meeting up the purposes of Kam Sunshine (general manager of the company).

May (2013) opines that stakeholder is essentially an individual, group or else a corporation that is having interest in yet another corporation. However, as per the given case of Sunshine Limited, the major stakeholders identified are illustrated below:

As rightly indicated by Macve (2015) customers can be considered as the immediate external stakeholders that Sunshine Limited need to take into account. However, the retailers, treat consumers as customers. Therefore, drawing, retaining and developing loyalty from essentially core consumers make certain the long term financial success of the corporation. In addition to this, in case of B2B (business to business) corporations, the business concerns are also customers that are purchasing products for commercial purposes. In particular, trade resellers are also engaged in direct selling to different retailers or else wholesalers, nevertheless, the end customers have the need to be counted as stakeholders of the firm. Again, in case if customers do not purchase manufactured products, for instance, failure of channel of distribution can be considered to be unavoidable.

As rightly indicated by Laing and Perrin (2014) different government as well as communities can be considered as the external stakeholders of the firm Sunshine Limited. As the corporation operate within specific communities, their actions exerts influence beyond only the customers. Essentially, the corporation incurs taxes, nevertheless, it is an unofficial expectation of different residents to function in an ethical manner and preserve environmental sustainability. Besides this, different communities expect corporations to be related to events as well as local charitable programs (Laing and Perrin 2014). However, it is thus, important for different business managers of the corporation Sunshine Limited to establish and at the same time maintain strong relationship with different regional officials for approximating regulatory transformations or else developments of community that can affect the functionalities.

Hu et al.  (2015) asserts that the business partners along with suppliers can be considered to be vital stakeholders in the present competitive landscape. However, the corporation has often has the inclination to develop different loyal associations with different associates as well as suppliers. In particular, this can help the corporation Sunshine Limited in developing different common objectives, policies as well as shared vision. In essence, trade sellers along with buyers can work together effectually in delivering maximum value to different end customers which can be beneficial to different partners (Laing and Perrin 2014). Furthermore, the trade partners are anticipated to function in an ethical way for averting tarnishing of the reputation of the customer of the corporation related to operations of Sunshine Limited.

As correctly put forward by Yao et al. (2015) corporation frequently make use of lenders for financing different business ventures, purchase of asset together with supply purchases.  Essentially, the banks get engaged in delivering loans for major purchases such as new building. Again, the suppliers might also deliver product inventory that a corporation might pay for at a later period of time. However, the prevailing creditors of Sunshine Limited can expect payment deadlines are met reliably. However, in this case, the corporation might possibly be able to enhance the relationship with different creditor. Therefore, this in turn can increase the possibility of acquiring quality funding in the upcoming period (Yao et al. 2015).

As per the given case study, it can be said that the accountant of the firm is Maria Mars that contributed towards preparation of financial declarations and altering the profit from essentially the period 2016 -2017 to 2018-2019. The primary role of the accountant is therefore performing different financial functions that can associated to process of collection, maintenance of accuracy, recording, evaluation as well as presentation of business as well as financial operations (Nuryanah and Islam 2015).

As per the given case, Kam Sunshine can be recognized as the general manager of the company Sunshine Limited. Essentially, this person us responsible for arriving at decisions to enhance the overall performance of the corporation. The general manager is therefore accountable for proper functioning of different departments and integration of different functions as well as departments for attainment of overall success (Mohd Nasir et al. 2011).

According to the given case study, the individuals investing in the company Sunshine Limited for acquiring advantage by earning a share of profit of the business can be identified as important shareholders of the firm. The shareholders can also be considered to be owners of corporations that are essentially limited by shares. Again, they are also regarded to be members of the staff and agree to become a part of the corporation. In addition to this, quantity of shares that are held by each individual reflects how much of the total business they actually own (Russell 2015).

Subsequent to the period ending on 30^th June in the year 2015, Kam Sunshine has appealed Maria Mars to find a way out for minimising specific profits in the next two years that starts from the period 2016 and onwards. Therefore, it can deliver consistent amount of profits over next two years for satisfying the shareholders’ interests. Maria has modified eventually the method of depreciation from the straight-line method to the sum-of-year -digits method. Moreover, she has not divulged the transformations carried out in different financial statements of the organisation.

The regulation standard AASB 116 declared by the Australian Accounting Standards Board (AASB) is associated to the accounting treatment of property, plant as well as equipment (Aasb.gov.au 2017). In particular, this is an amassed standard that can be applied to annual declarations periods beginning subsequent to 1^st July during the year 2009. However, the primary purpose and intention of this specific standard is to lay down specific accounting treatment that can be associated to PPE. As such, discriminating information to all end users of financial declarations in association to the investment of the firm on specific assets can be provided and alterations in investment. However, the major issues associated to accounting for PPE are realisation of specific assets, process of ascertaining carrying amounts, alterations in depreciation and impairment losses to be realised in relation to them.

However, according to the given case, Maria Mars has transformed depreciation method from particularly straight-line method to specifically sum-of-years-digits mechanism. Again, the notion that can be associated to depreciation technique is distribution of the tangible asset cost of over the economic life of the asset. Again, it can be witnessed that firms engage in depreciating fixed assets for both accounting as well as tax associated purposes.  Again, the former exerts an influence on declared net earnings of the business concern, whilst the latter exerts an influence on balance sheet pronouncement of the organisation. Principally, this cost is distributed as depreciation expends among specific period where this asset is supposed to be used.

In essence, the firm realise this expend for tax as well as financial reporting intentions. Again, the approaches to compute depreciation and the period over which particular assets are essentially depreciated, might perhaps deviate between different kinds of assets within identical business together with variation for tax resolves. Again, accounting standards or else regulations might mention this, as they differ from one nation to another (Aasb.gov.au 2017). However, there are several mechanisms and approaches for calculation of depreciation, namely, straight-line method, and sum-of-years-digits methods in addition to declining balance. However, start of depreciation expenditure is intrinsic at the time any asset is employed (Macve 2015).

As rightly put forward by Yao et al. (2015) sum-of-years-digits mechanism can be considered to be an augmented technique to enumerate depreciation of specific asset. However, the formula for computation of the value of depreciation value using this method is as presented below:

The value of depreciation is calculated by the multiplying the base of the depreciation with the remaining economic life of asset divided by the sum of the year’s digits method (Yao et al. 2015). This particular mechanism is essentially prepared for replicating pattern of consumption or use of assets. In addition to this, this method is also employed in the absence of any type of specific pattern and where asset is to be used over the economic years (Aasb.gov.au 2017). Essentially, the straight line mechanism of depreciation levy costs evenly over the economic life on different non-current assets. In addition to this, this mechanism of depreciation is efficient and in this case the economic realisation from an asset is anticipated to be identified consistently over the economic or useful life.

As such, Sunshine Limited is essentially a large departmental store and there are groups of member who take up decisions based on regulations at the time of establishment of corporation (Mohd Nasir et al.2011). As a consequence, Kam Sunshine has violated the organizational strategy by assuming own decisions that essentially has direct influence on financial pronouncements of the corporation. In addition to this, transformations were made in the operations of the corporation and the final decision need to be divulged to all the patrons related to the corporation. Thus, it can be hereby witnessed that activities of Maria Mars has not conformed to all the obligations of the accounting standard AASB 116 (Aasb.gov.au 2017).

In conclusion, it can be said that activities of managers in approaching different members of the staff and providing suggestions to alter the method of depreciation can have the considerable influence on specific codes as well as ethics of specific code of conduct within a corporation. Nevertheless, accountant of Sunshine Limited has undertaken diverse actions owing to fear from renewal of agreement and negative feedback for behaving against commands of the management. Again, this can also be discovered that profits remain at a constant level with alteration in the method of depreciation owing to minimization of charges of particularly depreciation throughout the year. Again, this process also does not stick to the accounting regulation stipulated under the standard AASB 116 since the accountant has not divulged such alteration in the change of mechanism used in the financial declarations of the corporation Sunshine Limited. 

Aasb.gov.au, 2017. Retrieved 9 May 2017, from http://www.aasb.gov.au/admin/file/content105/c9/AASB138_07-04_COMPjun14_07-14.pdf

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