Excello Commuminations - 1426 Words

Excello Communications Camille ORoarke ETH/376 September 15, 2014 Ding Hardin Excello Communications In the Excello Communications scenario, the CFO Terry Reed is faced with a dilemma. Sales have been dropping due to competition from overseas manufacturers. Mr. Reed’s concern with these reduced sales is the impact it will have on bonuses, stock options, and share prices. With a large order of $1.2 million placed on December 20, 2010 by Data Equipment Systems, Mr. Reed sees an opportunity to end the year with higher revenue than originally expected. The problem is that the customer has a stated contingency that the product is not delivered until January 11, 2011 as they do not have enough space in their warehouse to†¦show more content†¦Reasonable estimate of returns based on history. (www.accounting.answers.com, Sept.14, 2014) In this case, revenue cannot be recorded because all of the criteria is not met in regards to the return of the sale of goods. Even if it can be reasonable to assume that all six areas of this guideline was met, the ethicality behind the transaction remains; to falsify the earnings statement for the year ended 2010 in order to recognize higher earnings and maintain stock pricing, which goes along with the AICPA code of conduct regarding integrity. Section 54.02 states personal gain cannot override service to the public. Integrity cannot allow for deceit or subordinate of principle. (www.aicpa.org, sect. 54, Article III, Sept. 14, 2014) The third scenario suggested seems to be the most ethical and least questionable tactic. By offering a 10% discount to the buyer, Excello is reducing their total revenue on the sale but as long as the sale is completed, and the product delivered by December 31, 2010 the transaction can be recorded for the year ended 2010 without raising ethical issues. Discounts are not an uncommon occurrence in business, so by giving the buyer an opportunity to save some money on the cost of their purchase is a win-win scenario in this case. Although the original issue with receiving the order e arly was due to inventory space availability, the savings realized through the discount could