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ACCA Strategic Professional · Strategic Business Reporting (International) · Professional and ethical behaviour in corporate reporting

Kestrel Co's finance director asks the financial controller to defer recognising a $2m impairment of goodwill until next year because the current year profit is already below the bonus target for directors. The impairment is clearly required under IAS 36. Which fundamental principle is most directly threatened by the request, and what is the most appropriate first response?

Integrity and objectivity are threatened, because the request is driven by bonus self-interest and would make the accounts misleading. The controller should refuse to defer the required IAS 36 impairment and escalate to those charged with governance if pressure continues, rather than obeying a senior colleague.

  1. AConfidentiality; refuse to discuss the matter outside the company
  2. BIntegrity and objectivity; refuse to defer the impairment and raise the concern with those charged with governance if the pressure continuesCorrect
  3. CProfessional competence; attend further IAS 36 training before deciding
  4. DProfessional behaviour only; follow the instruction because the director is senior

Explanation

Deferring a required impairment to protect a bonus target involves undue influence and self-interest, threatening integrity and objectivity. The accountant should not be associated with misleading information, should refuse, and should escalate to the audit committee or board if pressure persists. Obeying seniority is not a defence.

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