One of your responsibilities as division manager of an

important
One of your responsibilities as division manager of an important component of Roxby Industries
is to oversee accounting for the division. One of the issues you grapple with on an almost
continuous basis is whether particular costs should be expensed immediately or whether they
should be capitalized. The company has an accounting policy manual that includes a section on
this topic, but it is rather vague in this regard. It simply says that if a cost benefits multiple
accounting periods, the cost should be capitalized; otherwise, that cost should be expensed
immediately. It also makes a brief reference to materiality by stating that, if a cost is sufficiently
small, it should be immediately expensed despite the fact that it may benefit multiple accounting
periods. No additional guidance is provided with regard to how these general concepts should
be applied.Over several years you have noticed a tendency of your staff to capitalize rather than
expense more costs. While you and your coworkers in the division do not receive a bonus or
other direct compensation that is tied to your division’s performance, you know that upper
management monitors carefully the financial performance of divisions. From time to time in
various meetings and in written correspondence, comments are made praising individuals and
divisions of the company for their positive financial performance. In fact, within your division you
have done the same when you meet with your employees and either compliments them for
strong financial performance or express concern about weak financial performance.Roxby
Industries has a code of professional conduct that is shown to employees when they are hired.
Within that code are references to personal integrity and the responsibility of employees to carry
out company policy and not engage in activities that benefit themselves at the expense of the
company. Like the accounting policies referred to above, there is no guidance on how this
general principle might be carried out.Instructionsa. What behavior may your comments in
meetings with your employees, or the comments made to you from upper management, be
motivating in terms of the continuous decisions that are being made about capitalizing and
expensing costs?b. What steps might you take to ensure that you and the employees in your
division are not taking actions that they should not take in light of the company’s accounting
policies and code of professional conduct?View Solution:
One of your responsibilities as division manager of an important
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