Company Finance, Takeovers, and Mergers - Essay Example

Accounting Case Study al Affiliation) Introduction The acquisition of other company has been considered an appropriate strategy for organizational expansion and growth (Morse, 2009). This has been enhanced by the fact that some organizations possess huge amounts of financial resources, although characterized by a slower rate of internal development, thus creating a need for takeovers (Morse, 2009). The amount of organizational takeovers and company mergers has been considered a standard of measure of the level of economic development. In most cases, company takeovers have been associated with incidents of job cuts, but this is a challenge that has been over-looked owing to the fact that the overall long term economic benefits surpasses this challenge, especially when the company that has been taken over performs poorly (Morse, 2009). In this regard, company takeovers do not necessary benefit the specific companies, but also the society as a whole. Research indicates that when performing an organizational takeover, care should be taken to ensure that the legal and ethical norms guiding this activity are not violated (Morse, 2009). This report will entail the analysis of a case study involving Home and Personal Care Products, which is a parental company that took over a prestige Fragrance Company. The discussion will specifically indentify the challenges faced by the Company’s Finance manager, Lisa as she attempts to solve the challenges she identified in the takeover process as well as ethical issues identified. Issues Faced by Lisa as she Attempts to Challenge Existing Policies and Procedures of the Acquired Company Ethical Issues Effects on Employees’ Jobs When companies undertake takeovers, it is evident that some of the employees within the companies that have been acquired may experience job cut-offs, while other may be subjected to demotion in the sense that their companies will have to be part of a larger company. In the case of Lisa, one ethical issue that faces her as she attempts to challenges the existing policies as well as procedures of the acquired company is the fact that the job position of the acquired company’s financial controller, Mr. Anderson has been affected. Mr. Anderson has worked in the Fragrance Company for the last 12 years and has worked hard for his promotions. However, when his company was acquired by the Home and Personal Care Product, this meant that he will be subjected to working in a smaller branch, rather than the larger company he used to work in. Inter-personal Relationships This is another ethical issue that presents a challenge to Lisa as she attempts to solve the problems presented by the acquired company’s procedures and policies. Inter-personal relationship is a key component of ethical standards in the process of organizational takeover and in some cases, mergers. Research indicates that a proper relationship between the parent organization the acquired organization is imperative for a proper transfer of roles thus, a high level of organizational operational efficiency (IESBA, 2013). From the case study, Lisa is faced with a challenge of handling Mr. Anderson’s dictatorial mode of management; this form of management basically entails making autonomous decisions, without consulting other company stakeholders and in some cases may involve giving commands. This is a major ethical issue as it could affect the nature of professional relationship between Lisa and Mr. Anderson. Confidentiality Confidentiality is a pertinent aspect of accounting ethics. It guides issues ascribed to the access of information, information sharing as well as the exposure of information (IESBA, 2013). In the case of Home Care and Products Company, Lisa the Finance Manager has been provided with the financial documents of the Fragrance Company: In this case, Lisa as a professional accountant has the responsibility to ensure that confidentiality issues, as an aspect of accounting ethics is maintained. In the case that the financial statement of the acquired company has to be exposed to a third party, Lisa will ensure that the right procedures are followed. Issues Faced by Lisa from a Professional Perspective According to Internal Ethics Standards Board of Accountant, objectivity is a key principle guiding the business and professional relationships between accountants. Objectivity is an imperative accounting principle that has to be taken into consideration in that; accountants should not allow conflicts and bias affect their duties and professional relationship (IESBA, 2013). In the case of Lisa and Mr. Anderson, it is apparent that there is a probability of conflict or bias occurring, especially caused by Mr. Anderson, who appears to be feeling inferior. In this case, Lisa should ensure that their relationship is objective and specifically focused on the organizational development. There is also the aspect of inappropriately recorded accounting figures in the acquired company. Lisa has identified this challenge and this is one of the reasons she has to meet Mr. Anderson. However, the major issue that faces in this scenario, according to IESBA , is the fact that she has to ensure that she does not only perform a quantitative analysis, but also a qualitative analysis of the reasons why such issues had occurred. The International Ethics Standards Boards of accountants stipulate that professional accountants are required to ensure that they perform both qualitative and quantitative analyses when assessing possible threats (IESBA, 2013). In the case of Lisa, it appears that her analysis was solely based on the quantitative values of the information recorded on the financial statements of the acquired Fragrance Company. Consequently, Lisa has indentified accounting flaws in relation to the financial statements provided by the acquired Fragrance Company. In this case, as a professional accountant, it is her responsibility to determine whether the flaws are a threat to the success of the mother company and how these threats can be eliminated or reduced to levels that are acceptable. Conclusion There are possible alternative courses of action that Lisa could take to ensure that anticipated challenges facing her actions are avoided. To begin with, Lisa should note that Mr. Anderson is an experienced accountant who has worked for over ten years. In addition, Lisa should take into consideration the fact that a proper relationship between Mr. Anderson and her is crucial for the success of both companies. In this regard, Lisa should give their meeting of a perspective of a participatory approach where Mr. Anderson and her engage in solving the identified challenges collaboratively on an equal basis rather than an approach where one acts as the boss. Additionally, as mentioned in the ethical issues sections, Lisa should make sure that she remains objective in her actions and maintains a high sense of professional ethics. References Morse, G. (2009). Company finance, takeovers, and mergers. London: Sweet & Maxwell. Top of Form Bottom of Form International Ethics Standards Board for Accountants. (2013). Handbook of the Code of Ethics for Professional Accountants. New York: International Federation of Accountants. Read More