Analysis of Case Study Related To the Organization-Free Samples

Question: What Is The Analysis Of The Case Study Related To The Organization? Answer: Introduction In the given case study, the general manager of the company, Kam Sunshine had approached Maria Mars, the accountant of the company i.e. Sunshine Limited. The main intention and motive was to make several alterations in the profits that are incoming within the business organization. Due to above scenario, the accountant Maria has entered into a dilemma as she has a concern towards getting her contract renewed. Even after knowing the unethical nature of the approach, Maria had changed the method of depreciation. The method was changed from straight-line method to the sum-of-years-digits method. The discussion related to the transparency, integrity and objectivity of Maria have been discussed along with the changes in the depreciation methods for getting into conformance with the organisational requirements and AASB 116. Ethics and governance McLaney and Atrill (2014) had stated and discussed that ethics is about the moral values and it has to be done without any force. The ethical values involved increase the users confidence and the upholding of the work levels along with the quality of the work. The following concerns related to ethics and authority of the company is discussed below: Deficiency of transparency and integrity There has been lack in the integrity and transparency on the part of the organization towards the shareholders of the company. The stakeholders of the company have a right to have the knowledge about the profitability condition of the investments made in the company. The changes related to the profits and productive condition of the business investments helps in the ascertainment of knowing about the continuing of the shares in the organization. Kam Sunshine, the managers had taken unethical steps by concealing the facts of the changes to be made in the method of depreciation for creating a wrong illusion of high profits to the shareholders. Thus, the same has led to the lack in the integrity and transparency. Contravention of objectivity Kam Sunshine, the general manager of the company had abused the senior executive or management of the company. The same has been done for achieving personal benefits and in such case, the accountant has assisted the manager. The accountant, Maria had changed the methods related to depreciation that resulted in variances in the timings of depreciation. The same can result in the influence of the decision making process of the investors that can lead to variances with the actual estimations. An accountant has the liability and accountability of representing and disclosing the relevant information of the books of account along with the relevant modifications or alterations made to the report (Beatty and Liao 2014). The same had not been disclosed and reported by the accountant anywhere that has resulted in the violation of the objectivity principle. The role of the accountants in the methods of changing depreciation On the basis of the case study and its information, Maria had decided the change in the depreciation methods to the sum-of-years-digits method from the straight-line method of depreciation (Bevis 2013). The objective of Maria to use the alternative method of depreciation was the minimisation of the profitability level in the two years upcoming for the transfer of the same to the years 2018 and 2019 and the same is illustrated below: Cost of asset $500,000 Useful life 5years Salvage value $50,000 Straight-line method of depreciation Therefore, Straight-line depreciation = ($500,000 - $50,000)/5 = $90,000 Sum-of-years-digits method of depreciation Therefore, Sum-of-years-digits = n (n + 1)/2 Sum-of-years-digits = 5 (5 + 1)/2 Sum-of-years-digits (SYD) = 15 Years Depreciable base Left over useful life SYD Applicable percent Yearly depreciation 1 $450,000 5 5/15 33.33% $150,000 2 $450,000 4 4/15 26.67% $120,000 3 $450,000 3 3/15 20.00% $90,000 4 $450,000 2 2/15 13.33% $60,000 5 $450,000 1 1/15 6.67% $30,000 Statement showing variation in deprecation Years Straight-line depreciation Yearly depreciation (SYD) Variation 1 $90,000 $150,000 ($60,000) 2 $90,000 $120,000 ($30,000) 3 $90,000 $90,000 Nil 4 $90,000 $60,000 $30,000 5 $90,000 $30,000 $60,000 From the above, we can see that the depreciation amounts would increase in the earlier years while the same would decline in the upcoming years. Thus, Maria has kept her words by keeping the profits stable over the years owing to the decline of the charges of depreciation over the years. Stakeholders The stakeholders constitute and take into account the group, individuals or the organizations that have an interest or concern with the other organizations. The major stakeholders identified in the company Sunshine Limited are discussed below: Customers The external shareholders that the company Sunshine Limited needs to consider urgently are the customers of the company. The customers must be retained and developed by maintaining loyalty and thus ensuring the financial success of the organization for the long term. The business organizations are considered the customers who purchase the products for the commercial use in the case of the business-to-business firms. The trade resellers are concerned in straight selling to the retailers or wholesalers. On the other hand the end customers need to be considered in addition to the stakeholders (Christensen et al. 2013). Partners and suppliers The other major and critical stakeholders constitute the partners and suppliers of the business among the competitive modern competition. There is a development in the relationships among the associates and suppliers of the company. The loyalty and links with the partners and supplier will possibly lend a hand to the company for the development of the general objectives, goals and the vision that has been shared among the partners and suppliers. The partners are expected to keep a good reputation and maintain loyalty for maintaining the trust of customers and also increasing the overall value of the organization (Crawley and Wahlen 2014). Communities and government The external stakeholders that are also majorly associated with the organization constitute the government and communities. The companies have a link and functioning with the communities that leads to an influence much beyond the customers. There is a common expectation that the residents are paying the taxes as per the incurrence. Additionally, the society has an expectation that the organisations have an association with the provision of charity. The decisions undertaken by the government authorities can affect the operations of the company that must be maintained by Sunshine Limited and its managers. The maintenance must be done for creating strong and effective associations with the local officials for the estimation of the changes in the regulations and development of the community that can affect the operations of the company. Creditors The creditors of the company involve the lenders that are approached to fund the business venture and for the purchase of the assets together with the suppliers. The financial institutions like the banks assist towards the provision of the loans for heavy investments like the acquisition of the new building. The organization can obtain the required funds and provide the same at the later point of time. The company and the management of the Sunshine Limited are expected to pay off the payments and meet the deadlines with consistency and appropriate manner. The same will help in the improvement of the links and relations among the creditors for increasing the potentiality of the attainment of the funding in the long term. Accountant The accountant has a responsibility of maintaining the books of accounts and in the given case the same has been done by Maria Mars. She had made a contribution in recording the data and prepare the statements and reports and also changing the profits from the years of 2016 and 2017 to 2018 and 2019. General Manager A general manager has a responsibility and accountability of undertaking proper decisions and thus improving the overall performance of the organization. In the given case, Kam Sunshine was identified as the general manager for the company. Shareholders The investors of the company Sunshine Limited for earning business profits against the shares hold are recognized as the most important shareholders of the business organisation. Impact of AASB 116 Kam had requested Maria to find ways to reduce the profits for the years that would be starting from 2016. Kam wanted to attract the faith and loyalty of the investors and shareholders towards the company. The AASB standard 116 has a relation with the property, plant and equipment and has an application from the years starting on or after the 1st July 2009. The standard has an intention towards the provision of the specifications related to the accounting of the property, plant and equipment. The accounting for the property, plant and equipment carries along major issues and concerns that are related to the ascertainment of their carrying amounts, realisation of the assets, realisations of the impairment losses and the modifications in depreciation (Henderson et al. 2015). In the given scenario or case, Maria Mars the accountant has carried on the modifications in the methods of depreciation i.e. from the straight-line method to the sum-of-years-digits method. The accountant carried on the concept that the depreciation methods distribute the cost of the tangible asset over the useful life of the assets. The business organizations have an engagement towards the depreciation of the non-current assets and fixed assets for the purposes related to both the accounting and tax-related purposes (Van Mourik 2014). Both of them have an impact on the net income or balance sheet of the business organization and the cost is initially apportioned in the form of depreciation expenses among the expected utilisation period of the asset. The method of depreciation i.e. the sum-of-years-digits method is a method and technique that is used in the computation of the depreciation of an asset and the formula is as under: The method of SYD is carried under the preparation for the reflection of the consumption pattern of the major asset. Additionally, the same is used in the non-existence of any particular patterns in case where the same gets utilised along the years. The method of straight line depreciation takes steps in charging the costs in a uniform manner over the useful life of the non-current assets. The method is effective and efficient as it creates an economic realisation from the asset that is anticipated to be uniformly recognized over the useful life of the asset (Weil et al. 2013). The company Sunshine Limited is an outsized departmental store. A group of associates carry out the decisions collectively developed on the rules at the moment of founding of the organisation. Therefore, the manager Kam Sunshine has gone against and violated the policies of the organisations. He has undertaken his own major decisions that have created a direct impact on the financial statement of the business organizations. Furthermore, in the given case, the eventual judgment is desired to be revealed to all the associated stakeholders with the business organisation. Therefore, from the above discussions it can be analysed that the activities of the accountant, Maria Mars has not acted in accordance with the necessities of the standards contained under the AASB 116. Conclusion The above discussions and analysis helps in the stating of the actions of the manager towards the manner of approaching of a member of staffs. It also helps in making the suggestions towards the changing in the depreciation methods that has a major influence on the code of conduct and ethics and governance related with the business organization. On the other hand, the accountant of Sunshine Limited Maria has carried on the activities fearlessly, towards the contract renewal and gaining negative feedbacks for the behaviours. From the above analysis, it can be noted that the profits will remain fixed and stable with the advent of the change in the methods of depreciation over the years. On the other hand, the same does not have conformity with the AASB 116 standard, as there has been no disclosure of the changes in the method among the financial statements of Sunshine Limited. References List Aasb.gov.au., 2017. [online] Available at: https://www.aasb.gov.au/admin/file/content102/c3/AASB116_07-04_ERDRjun10_07-09.pdf [Accessed 24 Apr. 2017]. Beatty, A. and Liao, S., 2014. 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