Deb Faust has a problem. She is the vice president of finance, and when she first sorted the stocks in the portfolio she realized that she could increase her net income for the next year by only including trading stocks that increased in value. She realized that she can classify even securities that have lost value as long-term noncommercial securities and that her 2014 net income will not be affected. Her problem lies with her controller, Jan McCabe, who disagrees with her. McCabe wants to do the exact opposite, arguing that the company is having a good earnings year and that recognizing losses now will help stabilize revenue for next year. In future years, in case of an unprofitable year, the company will have intrinsic earnings. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an Original EssayMarketable securities held by a company are reported on the financial statement, but how the company classifies and records them depends on how long the company intends to hold them. Marketable securities can be classified as marketable or non-marketable, available for sale or held to maturity. How the company reports them will change the market price of the securities and can affect financial statements. Securities are recorded on the balance sheet at their fair value, however if there is a change in fair value, that change is recognized as a gain or loss. Ranking securities the way each wishes will have an effect on net income. If they classify gains as non-trading securities, this will be shown as a gain on the income statement, as well as classifying losses as non-trading securities will be deferred until next year. By posing these different scenarios, each employee is acting unethically. None of these proposals comply with International Financial Reporting Standards (IFRS). IFRS uses a financial reporting framework to determine the measurement, recognition, presentation and disclosure of all material items that appear in the financial statements. By manipulating the securities reporting, this is not an accurate presentation of the financial statement. This inaccuracy not only affects the employees, but will also affect the company's officers, directors, shareholders, and any potential investors who may view this financial statement and believe that it is an accurate presentation of the company's net income. This may also have implications for potential auditors who will most likely find this statement incorrect. Faust and McCabe can certainly address the issue of selling unprofitable stocks with management and make sure they are aware of the potential issues with how they will be classified. These securities can be sold and this would not be unethical. Faust and McCabe should take the steps of the ethical decision-making model and reflect on their ethical dilemma. They can start by addressing the legal issues that might arise if they list the securities as they propose. If they evaluated the consequences of their decision by listing possible outcomes, would they get a better picture of what might happen if they listed the titles incorrectly? They must also consider the other stakeholders involved in this decision and how they will be affected. They must also consider their professional obligations with this proposed course of action. Both Faust and McCabe are demonstrating a lack of professional judgment in this case. They believe they are doing the best thing for the company but in reality this could turn into a situation.