Do you think it is ever right to back out of a promise that you gave to someone else
Assume that Billy calls his friend at Foot and Balance and she explains the delay is due to the recent merger of Vouch and Trace LLP with Foot and Balance. She tells Billy that
the offer should be forthcoming. However, Billy gets nervous about the situation and decides to accept the offer of Tick and Check. A week later, he receives a phone call from the partner at Foot and Balance who had promised to contact him about the firm’s offer. Billy is offered a position at Foot and Balance at the same salary as Tick and Check. He has one week to decide whether to accept that offer. Billy is not sure what to do. On one hand, he knows it’s wrong to accept an offer and then renege on it. On the other hand, Billy hasn’t signed a contract with Tick and Check, and the offer with Foot and Balance is his clear preference because he has many friends at that firm.
Questions 1. Do you think it is ever right to back out of a promise that you
gave to someone else? If so, under what circumstances? If not, why not?
2. Identify the stakeholders and their interests in this case. 3. Evaluate the alternative courses of action for Billy using
ethical reasoning. What should Billy do? Why?
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48 Chapter 1 Ethical Reasoning: Implications for Accounting
Gloria Hernandez is the controller of a public company. She just completed a meeting with her superior, John Harrison, who is the CFO of the company. Harrison tried to convince Hernandez to go along with his proposal to combine 12 expenditures for repair and maintenance of a plant asset into one amount ($1 million). Each of the expenditures is less than $100,000, the cutoff point for capitalizing expen- ditures as an asset and depreciating it over the useful life. Hernandez asked for time to think about the matter. As the controller and chief accounting officer of the company, Hernandez knows it’s her responsibility to decide how to record the expenditures. She knows that the $1 million amount is material to earnings and the rules in accounting
require expensing of each individual item, not capitaliza- tion. However, she is under a great deal of pressure to go along with capitalization to meet financial analysts’ earnings expectations and provide for a bonus to top management including herself. Her job may be at stake, and she doesn’t want to disappoint her boss.
Questions 1. What would motivate you to speak up and act or