This question is about the " Issues in Financial Reporting and Analysis"

3. Ethics case with Provisions You are the newly appointed deputy chief accountant at Ship Ahoy Shipping Co Ltd. You review the company's accounts for the past 10 years, and you observe the following data: Profits Investment Shipping + Annual debit Reported (losses) income Investment or (credit) to Net Prot from Income($'OOOs) Provision for shipping Ship Modernisation 2012 \"2\" 2014 538) V 61 (277) 2015 2016 2017 2018 Each year, the reported Net Prot equals the sum of shipping profit (or loss), investment income and the debit or credit to Provision for Ship Modernisation. You are concerned that the shipping operations (the company's core business) have been unprotable for all but one of the past 10 years, and that these losses have been made up each year by investment income (the company has a large investment portfolio). The sum of shipping and investment income varies a lot, being negative in six and positive in four of the past 10 years. Reported Net Profit on the other hand, is always positive, although it is not a smoothly increasing series of numbers, and indeed in 2018 has declined sharply. Puzzled by the account Provision for Ship Modernisation, you make enquiries and find that this account had been created and built up in the late 19905 and early 20005 when the company had several lucrative shipping contracts with the Australian government and profits on those contracts were very high. Those contracts have now ceased. In order to counter accusations that the company was earning excessive prots, each year in the late 19905/early 20005, an accrual debit to a Ship Modernisation expense account was created with the corresponding credit to Provision for Ship Modernisation account. The latter has appeared in the balance sheet as a noncurrent liability for many years. In 2009, the account had a credit balance built up of $5,400,000. Ship modernisations are a major activity involving large outlays but are not essential ifships are well maintained. Ship Ahoy's vessels are very well maintained. Up to 2018, none of the company's fleet has ever actually been modernised and the company has no immediate plans to modernise any ship. The company's key executives are paid annual bonuses if the company reports a net prot, but no bonus is paid if a loss is reported. Required: (a) Comment on the legitimacy of the Provision for Ship Modernisation Account from the viewpoint of AASB 137 Provisions. (b) Has the company engaged in earnings management over the last 10 years? (c) Comment on the use made of the Provision for Ship Modernisation Account from a Positive Accounting Theory perspective. (d) Comment from an Aristotelian ethical perspective on the legitimacy of the Provision for Ship Modernisation Account and the use made of it over the past 10 years. (e) Comment from a Utilitarian ethical perspective on the legitimacy of the Provision for Ship Modernisation Account and the use made of it over the past 10 years