Question

ETHICS (Rule-Making Issues) When the FASB issues new pronouncements, the implementation date is usually 12 months from date of issuance, with early implementation encouraged. Karen Weller, controller, discusses with her financial vice president the need for early implementation of a rule that would result in a fairer presentation of the company’s financial condition and earnings. When the financial vice president determines that early implementation of the rule will adversely affect the reported net income for the year, he discourages Weller from implementing the rule until it is required.

Instructions:Answer the following questions.(d) Which stakeholders might be affected by the decision against early implementation?

Short answer

Lenders and investors are the ones to be most affected by the decision against early implementation.

Step-by-step solution

Meaning of Stakeholders

An individual or a company that invests in and takes interest in a business is known as a stakeholder for that business entity. Stakeholders need an in-depth knowledge of the business to make their investment decisions.

Explanation

The lenders and investors are dependent on the financial statements for ascertaining the firm's financial condition, so they are the ones who gain the most through early implementation. However, the stockholders who are contemplating the sale of stock may have to bear the loss of the early implementation as it lowers net income. Likewise, it may also lower the stock value.