Professional ethics and "end-of-year games." Janet Taylor is the new division con- troller of the snack foods division of National Foods. National Foods has reported a minimum 157c growth in annual earnings for each of the past five years. The snack foods division has reported annual earnings growth of over 207c each year in this same period. During the current vear, the economy went into a recession. The corporate controller estimates a 10% annual earnings growth rate for National Foods in this year. One month before the December 31, fiscal year end of the current year, Taylor estimates the snack foods division will report an annual earnings growth of only 89c. Warren Rvan, the snack foods division president, is less than happy, but he says with a wry smile, "Let the end-of-year games begin." Taylor makes some inquiries and is able to compile the following list of end-of-year games that were more-or-less accepted by the prior division controller:

a. Deferring routine monthly maintenance in December on packaging equipment by an independent contractor until January of next year.

b. "Extending" the close of the current fiscal year beyond December 31 so that some sales of next year are included in the current year.

c. Altering dates of shipping documents of next January's sales to record them as sales in De- cember of the current year.

d. Giving salespeople a double bonus to exceed December sales targets.

e. Deferring the current period's advertising by reducing the number of television spots run in December and running more than planned in January of next year.

f. Deferring the current period's reported advertising costs by having National Foods' outside advertising agi icy delay billing December advertisements until January of next year or having the agencv alter invoices to conceal the December date.

g. Persuading carriers to accept merchandise for shipment in December of the current year although they norma,'- would not have done so.

Required 1. Why might the snack ods division president want to "play the end-of-year games" de- scribed above?

2. The division controller is deeply troubled and reads the "Standards of Ethical Conduct for Management Accountants" in Exhibit 1-8

(p. 17). Classify each of the end-of-year games

(a-g) as (i) acceptab; >r (ii) unacceptable according to that document.

3. What should Taylor d if Ryan suggests that end-of-year games are played in every division of National Foods ana that she would greatly harm the snack foods division if she did not play along and paint tl ,e rosiest picture possible of the division's results?