The objective of this report is to evaluate Ethics and Governance Changing Depreciation Methods in the context of Pringles Ltd.
- Evaluate the stakeholders by considering scenario of the case study.
- Identify the ethical issues by considering situation of the case.
- Determine the changes in accounting method.
- Critically analyze do Marion’s actions comply with the requirements of IAS 16/AASB 116.
Depreciation is condition which involves reduction of process of usable products or services that will support a better management of operations followed by firm. The depreciation is the condition when an asset or equipments that are been owned by the firm loses its value over the course of time (Shawver and Miller, 2017). It impacts overall functionality of organisation and profitability of firm like Pringles Ltd which is a retail farm. An effective management of depreciation is very necessary. It will help in maintaining a good relationship with their investors and stakeholders which will support a good rise in capability of firm. It supports and brings a stability in economic condition of company and will support a gaining of profit in consistent manner, supporting a consistent satisfaction level of stake holders of firm. This report will lay emphasis on different stake holders associated with the firm. Besides this, various ethical measures are been taken in consideration by the company that will help in good rise in capability of the organisation and in maintaining the sustainability of firm. Besides this, the assessment in the changes that will be taken by Marion in accounting methods of the firm are been discussed and the action's compliance with the IAS 16/AASB 116 is been analysed (Rajput, 2017).
Who are the stakeholders in this situation?
Stake holders plays a very deep and crucial role in management of a wide range operations and meeting of the targeted goals and operations. The stake holders of Pringles Ltd will involve customers, investors, suppliers and other executive level employees and work force, who are related to firm (Qatawneh and Alqtish, 2017). They will see through proper management of revenue making and decrease in depreciation rates, so that organisation can work upon it to maintain its sustainability. These stake holders, will help Pringles Ltd. To cope up with proper measures that will support an effective management of operations and meeting of targeted operations which will support proper growth and development of firm. Besides this, they will look after distribution of assets and revenue within firm. The stake holders will look after the proper management of the operations which will support a good rise in the compatibility and meeting of the targeted goals and operations. They will look after the different operations and will give the proper financial support to the firm that will help the retail organisation to carry out its operations and other business activities in a very effective and efficient manner.
As many stake holders are associated with organisation by the means of contract or agreement, they have to be keep happy and satisfied in order to get the proper support and help to carry out the business operations in an effective and efficient manner. Various stake holders play vivid role in organisation such as:
Stakeholders is an independent identity who is directly or indirectly connected to an organisation. It can be either internal or external (Lubbe, N. and Lubbe, D., 2015). Internal includes employees, directors, etc. while external includes customers, government, etc. They can have a positive and negative impact on project or organisation. In context to given case stakeholders are defined as below :-
Customers- They are external entity and is directly connected to Pringles ltd.. So changing the depreciation method will have an effect on value of assets. This will affect the market value of company. But it will help in maintaining goodwill and stable growth in the market. Customer will be more attracted towards them. Also, giving dividends will result in increase in customer satisfaction and retaining them.
Suppliers- They are entity that supply products of Pringles ltd. to customers. They can also be a part of shareholders. Thus, maintaining profits will in attracting more suppliers. This will make more strong relations with organisation. Also, this will lead to increase in sales even in economic slowdown. Moreover, they will get more dividends (Xiong and et.al., 2017).
Employees- In this general manager is stakeholder of Pringles ltd.. The decision of manager will help in maintaining stability in profits in the future. With this company can give more dividend to their shareholders. This will help in growth of Pringles ltd..
Accountant – The Marion Mason is accountant of Pringles ltd.. By changing depreciation method, she can build strong relations with them and extend her contract with organisation. Also, with this she can work for Pringles ltd. for long time and in any problems arises in financial statements she can help the company.
What ethical issues, if any, arise in this situation?
As depreciation is a financial condition associated with the operations and revenue of the organisation, it will be susceptible to many issues. Some major ethical issues that can occur in this case are as follows:
State of confusion: it will create a situation of uncertainty that leads to formation of confusion and condition of deceit that can land down to legal cases and forgery charges on firm. Accountant and financial executives like Marion that will be associated with enterprise has to look after the rectification of this ethical problem.
Changes in statements and reports: Alteration in financial statement and reduction in profitability measures will cause firm to grow develop and flourish in a better way. But, this may impact company’s financial stability and market share. Also, customer satisfaction will be influenced (Bhasin, 2016).
How does the change in accounting methods by Marion meet the objectives set out by Peter?
Marion will use sum of year digit method which will involve assessment of assets and resources owned by firm in a very positive way. This approach supports analysis on annual basis which covers overall expenses and thus will help firm to mitigate useless expenses to save their resources and revenue. This will help accountant of firm, Marion to meet targets of owner, Peter of evenly distribution of profit and revenue. It will help organisation to maintain its position during economic slowdown phase.
As predicted by economists there was an economic slowdown in 2022 and 2023. Due to this companies profits will be affected. Thus, in order to maintain stability is growth and profits of Pringles ltd. the manager Peter Pringle decided to change the depreciation method from straight line to sums of years digits. With this company can easily achieve its goals and objectives. They will be able to keep ease in profits. Also, with equal amount of depreciation charged company can manage its financial position in the market. This will be h