Ethics Case 1

Health Corporation has several notes receivable reported as current assets on its year-end balance sheet. While collection seems certain, it may be delayed beyond one year. Because of this, the controller wants to reclassify these notes as non-current. Healths treasurer also thinks that collection will be delayed but does not favour reclassification because this will reduce the current ratio from 1.5:1 to 0.8:1. This reduction in current ratio is detrimental to company prospects for securing a major loan.

Instructions

Answer the following questions:

• Should the controller reclassify the notes? Give your reasons.
• Does the treasurers position pose an ethical dilemma for the controller? Explain your answer.