Montego Bay Distributors Limited (MBDL) is located at 10 Pimiento Way, Freeport, Montego Bay. The company is a local conglomerate. The entity is a subsidiary of the Kent Group of Companies. The company was formed on May 12, 1976, by Tony Kent who migrated from Ireland. The firm is listed on the junior stock exchange. Over the years the entity has always practiced good corporate social responsibility. Corporate social responsibility (CSR) is entrenched in the by-laws as well as organizational policies. Its corporate social responsibilities include cleaning the beaches, parks, and historical buildings in Montego Bay. The entity has been doing this for the last ten years. 

Each year, the company spends on average J$100 million doing so. After which, it received various tax concessions from local as well as central governments. As a result, last year, the mayor of Montego Bay presented MBDL with the keys to the city of Montego Bay at the annual Independence Day gala. At the gala last year, the company’s chief executive officer (CFO) stated that he will increase the company’s annual contribution by at least 20%. He indicated that the city and his firm have a wonderful partnership which he thinks will continue for the foreseeable future. Furthermore, in keeping with the organizational policies, MBDL is committed to corporate social responsibility. At the start of the year, the CEO reaffirmed his position on CSR. In the local newspaper, he made a statement that MBDL will contribute H$125 million to the city’s annual clean-up campaign. This was also ratified by the board of directors. The CEO went further and met with the mayor who initiated the campaign for the current period. However, during the year, the company’s performance started to wane significantly. 

Revenues decreased by 45% and the firm incurred net losses amounting to J$10 billion dollars due to reduction in revenues and impairment of inventory and machines. Furthermore, the entity was delinquent on filing its monthly general consumption taxes (GCTs) and now faced fines, interest, and penalties amounting to J$1.5 billion. Additionally, the management accounts depicted huge unfavorable variances which currently remain unexplained. As a result, MBDL has reneged on earlier promises made to the city of Montego Bay. The company failed to make due on its obligation to clean the beaches, parks, and historical buildings. Despite this, the mayor went ahead as planned and acquired residents and cleaning agencies to clean on the basis that MBDL will commit to earlier promises. To date, neither the parish council nor the mayor was contacted and the CEO stated in a letter to the mayor that he and his company had no contractual obligations to the city. He contacted the entity’s legal counsel who also stated that a contract was not drafted between both parties; therefore, the likelihood of potential laws suite is remote. Nevertheless, the mayor commenced legal actions against the CEO and MBDL. The suit commenced on December 10, 2015. However, the court postponed proceedings until January of the subsequent year. The current financial accounting period ends on December 31, 2015, and management failed to disclose matters in the financial statements for this period.

With the aid of relevant accounting standards advise management whether the matters should be adjusted or disclosed in the notes to the current financial statements.