Problem
Cranfield is a public limited company that operates a national chain of supermarkets selling groceries and other household goods. It prepares its financial statements in accordance with International Financial Reporting Standards. The directors of Cranfield receive a cash bonus each year if reported profits exceed a pre-determined target. Cranfield has performed in excess of targets for year ended 30 June 2021 but financial forecasts for 2022 are pessimistic.
A new accountant has recently started at Cranfield. She noticed that the provisions balance as at 30 June 2021 is significantly higher than in the previous year. She made enquiries of the finance director, who explained that increase was due to substantial changes in food safety and hygiene laws that would become effective during 2022. As a result, Cranfield must retrain a large proportion of their workforce. This retraining has yet to occur, so a provision has been recognised for the estimated cost of $3 million. The finance director then told the accountant that such enquiries were a waste of time and would not be looked at favorably when deciding on her future pay raises and bonuses.
Task
Discuss the ethical and the accounting implications of the above situation from the perspective of the accountant.