When You Are Judge and Jury!

You are the lone accountant employed by Fidos Feast, a small producer of premium dog food that sells directly online. The effects of the Great Recession are still plaguing the company. During that time, many of the companys customers became cost-conscious and switched to lower-cost brands. Fortunately, as the economy has improved many of the firms long-standing customers are returning and things are looking up. The problem is the companys cash flow has suffered severely during the past few years, and the firm needs immediate funding to continue to pay its bills. The CEO has prepared a proposal to a local bank asking for a loan to keep the company afloat. Unfortunately, you know that Fidos financial statements for the past year will not show good results and expect the bank will not approve the loan on current financial information, even though the firm seems to be coming back.

Before you close the books for the year, the CEO suggests you might improve the companys financial statements by treating the sales made at the beginning of January of the current year as if they were made in December of the past year.

You know this is against the rules of the Financial Accounting Standards Board (FASB) and refuse to alter the information. The CEO warns that without the bank loan, the business is likely to close, and everyone will be out of a job. You know hes right, and know its unlikely many of the firms employees will find new jobs.

1. What are your alternatives?

2. What are the likely consequences of each?

3. What will you do?