First of all, I want to state that if I am the accountant at this company, I really
need to reevaluate my position and personally reflect whether my hard work to
obtain my degree justifies me working for this CEO. c If the CEO has this type
of thinking in this particular “secluded” situation, what else will he/she be
asking me to do in the future that is unethical and doesn’t abide by GAAP
standards. c There are major issues and concerns from a financial reporting
perspective when a CEO is trying to add lots of overhead to the cost of the
building to increase profit for that year is unethical. c c When the suggestion is
made to add 1/12 of your salary to cost of the building, raises red flags. There
are certain things that can be added which are fixed overhead and variable
overhead to self-constructed assets. This type of asset is built by the company,
and they appear on the balance sheet. The cost included in self-constructed
assets are direct cost such as materials and labor that are strictly associated
with the construction. The total assets would have to exceed the fair value and
be recorded at fair value. c The question concerning the building and when the
actual construction started, which was in 2016, does not allow for 2015
preplanning to be capitalized as interest in year 2015. The rules of GAAP tell
us that the interest can be capitalized on from June 2016 when construction
started. Interest is added to the cost of the long-term asset, so preplanning is
not recognized in the current period as an interest expense. Moving forward it
is a fixed asset and is included in the depreciation of the long-term asset. Even
though it initially appears on the balance sheet and is charged as an expense
over the useful life of the asset; the expenditure should appear on the income
statement as depreciation expense and not an interest expense (Accounting
Tools 2019) If I was to report the financial statement based on the CEOs
recommendations, I would not be abiding by the GAAP and risking my job at a
later date.
