ACQUIRING GOOD ETHICAL JUDGMENT 155 SCENARIO3 O BUNDLE OR NOT TO BUNDLE What counts as true conservativism? The Situation n. ubl ic company is faced with the necessity of a significant write-down of ad st tangible assets associated with a previous share-based acquisition. Much work and expertise has been brought to bear in looking at this problem; there is no escaping this conclusion. After the meeting in which this is decided, the company's CFO calls the Financial Controller aside and says, "Why don't we look at this circumstance as an opportunity to write down the value of all kinds of questionable asset values on our financial statements, and record them all as one big extraordinary item? If we take that approach, we can position ourselves for much higher profitability later. You see what I mean? So that's what I would like you to do." on pt Question The Financial Controller finds this reasoning very appealing from the point of view of the company, but he is a CPA and also regards it is questionable. He has the following train of thoughts. Which do you concur with? What is not permissible for him? What is his best course of action among permissible alternatives? Looking for an Answer 1. His first thought is simply to do what the CFO wants, but to dress it up so that it could pass muster: "An accountant can always book an asset in a 'conservati manner if he wants," he says to himself, "It's likely that a conservative treatment of the aforementioned intangible and other assets, as manifested in an extraordinary item write-down, would work out to be roughly the same as the bundled write- down the CFO wants. So I can do what he wants and still, in a sense, make it fall within GAAP under conservative treatment principles" 2. He then thinks, second: "But wouldn't that be manipulative-to bundle unrelated write-downs without both obtaining an independent valuation and fully declaring the actions? I think I'll just ignore what the CFO said, and, if someone questions me later about it, I'll simply say that I didn't think he was serious, but just testing me