A Pharmaceutical Corporation expects to have several current notes receivables after the end of this financial period. In spite of the company’s certainty to collect the notes receivables, the transaction may be delayed by one more accounting year. Due to this prospect, the controller is compelled to re-categorize the notes receivables as non-current. Besides, the corporation’s accountant acknowledges the delay of the collection, but she does not favor the idea of re-classification since it will lead to a drastic decrease of the current ratio from 2.5:2 to 9:2. This reduction in current ratio will have negative consequences on the future of the corporation since it will not be able to secure major loans.
Since both professionals, the business controller, and the accountant, figure out that the delay of the current notes receivables will have an effect on the contradicting financial interests of the company and its creditors, the decision whether to re-categories or not has ethical dimensions. Decisions made based on institutional, or personal interests seldom lead to the correct course of action in an organization (Klein, 2015). For instance, in the situation above the corporation manager should re-categorize the current notes assets to fixed notes receivables since after the collection delay they cannot generate cash within one financial year. If the current notes are not re-classified, the current ratio will remain to be 2.5:2, suitable enough for the corporation to get access to a major loan. In this case, the Pharmaceutical Company will substantially benefit, but the creditor company will have been misinformed about the financial position of the corporation and its ability to meet the requirements of the loan.
Decision making in any organization ought not to be based on individual or intuitional feeling since they will have adverse consequences on the entire business operations. Thus, while making daily business decisions, the managers should use a particular criterion to ensure ethical judgments (Jeffrey, 2015). General reports and judgments of a corporation should favor all the parties involved whether internal or external publics.
References
Klein, G. L. (2015). Ethics in Accounting: A decision-making approach.
In Jeffrey, C. (2015). Research on professional responsibility and ethics in accounting.
