There are certainly multiple issues in this scenario.
From a financial reporting perspective, you cannot capitalize any interest
during construction. You are able to capitalize it as part of the asset after
construction, but not prior to completion (Wahlen, 2017). In this case, it
appears the CEO is attempting to capitalize interest in the middle of
construction which clearly cannot occur. Once the construction is done,
however, you may capitalize interest for all funds related to the construction,
but the CEO is suggesting falsifying some figures which is definitely
something that cannot occur (Wahlen, 2017).
From an ethical standpoint, the CEO is breaking a code, in a way. There are
accounting standards in place, GAAP, which serve as the guidelines that
financial reporting must occur. By "adding lots of overhead" and attempting
to convince an accounting professional to fudge the numbers, the CEO is
violating every single standard and then some. There is a certain manner in
which figures are required to be reported, and the number one thing is
obviously correctness.
It may get me in trouble with the CEO and potentially other unethical
employees, but I would try to find someone to report to regarding what I was
asked to do. I can also report the CEO to the Financial Accounting Standards
Board and the Securities Exchange Commission, who are in charge of
enforcing GAAP (Ross, 2021).
Reference List:
Ross. (2021, July 15).Who Enforces GAAP?Investopedia. Retrieved March
8, 2022, fromhttps://www.investopedia.com/ask/answers/020915/who-
enforces-gaap.asp
Wahlen, James M., et al.Intermediate Accounting: Reporting and Analysis.
Cengage Learning, 2017.
