Do you agree or disagree with the following post belowfrom a classmate? Please exaplain with cited sources in the bodytexts and reference. Thank you!
When an organization issues stocks, it has some options for whatis received. When doing this, ethical issues may arise if an assetor service is used as payment for an issued amount of stock. Theseethical issues may be in the form of inaccurate estimates values ofassets/services, fair market values and/or financial reporting.
Inaccurate estimates of certain assets or services traded forstock can put an organization in a financial bind. Someassets/services may be worth more or less than what is stated. Tobetter explain this, imagine a new software company developing atime-saving application for financial information gathering. Thistechnology, however, has not been tested in a real-worldenvironment. This software company has offered to provide theirsoftware in exchange for stock in the organization it services. Theorganization agrees and sells an amount of stock to the softwarecompany. The organization soon figures out that the software isfull of Ć¢ĀĀbugsĆ¢ĀĀ and has cost more to maintain than the stocksold.
When stock is issued for non-cash items or services, the GAAPrequires that the items/services and the stock must be recorded onthe financial books at the fair market value at the time of theexchange (Harrison, Horngren & Thomas, 2013, p. 592). Also,since both the stock exchanged and the items/services received mayhave different market values, organizational accountants mustrecord the fair market value of the one that is more clearlydeterminable or verifiable (Avenkamp, n.d.).
Organizations may have different options when trying to selltheir stocks for additional revenues. However, selling stock fornon-cash items or services may not be the best way to do so. Thetwo important things to remember are: some accounting values aremore solid than others and not all financial statements meanexactly what they say; unless they are audited by independent CPAs(Harrison, Horngren & Thomas, 2013, p. 593).
Reference
Avenkamp, H. (n.d.). Stockholders' Equity. AccountingCoach. Retrieved fromhttps://www.accountingcoach.com/stockholders-equity/explanation/9.
Harrison, W. T., Horngren, C. T. & Thomas, C. W. (2013).Financial Accounting (9th ed.). Upper Saddle River, NJ:Pearson Education, Inc.