Bredahl Logistics, a U.S. shipping company, has just begun distributing goods across the Atlantic to Norway. The company began operations in 2010, transporting goods to South America. The company’s earnings are currently trailing behind its competitors and Bredahl’s investors are becoming anxious. Some of the company’s largest investors are even talking of selling their interest in the shipping newcomer. Bredahl’s CEO, Marcus Hamsen, calls an emergency meeting with his executive team. Hamsen needs a plan before his upcoming conference call with uneasy investors. Brehdal’s executive staff makes the following suggestions for salvaging the company’s short-term operating results:

a. Stop all transatlantic shipping efforts. The start-up costs for the new operations are hurting current profit margins.

b. Make deep cuts in pricing through the end of the year to generate additional revenue.

c. Pressure current customers to take early delivery of goods before the end of the year so that more revenue can be reported in this year’s financial statements.

d. Sell-off distribution equipment prior to year-end. The sale would result in one-time gains that could offset the company’s lagging profits. The owned equipment could be replaced with leased equipment at a lower cost in the current year.

e. Record executive year-end bonus compensation for the current year in the next year when it is paid after the December fiscal year-end.

f. Recognize sales revenues on orders received, but not shipped as of the end of the year.

g. Establish corporate headquarters in Ireland before the end of the year, lowering the company’s corporate tax rate from 28% to 12.5%.

REQUIRED:

1. As the management accountant for Brehdahl, evaluate each of the preceding items (a–g) in the context of the “Standards of Ethical Behavior for Practitioners of Management Accounting and Financial Management,” Exhibit 1-7 on page 16. Which of the items are in violation of these ethics standards and which are acceptable?

2. What should the management accountant do with respect to those items that are in violation of the ethical standards for management accountants?