Reference no: EM132997783
Background Information
Blast Ltd ("Blast") is a large public listed Australian energy company that owns several coal-fired and gas power stations. The acquisition of these assets has been financed by loans from Australian banks. Blast has adopted the AASB 116: Property, Plant and Equipment cost mode for this class of asset. For many years Blast has successfully sold energy produced by their coal-fired and gas power stations assets to commercial clients and residential customers.
The findings of a recent Government Energy Industry in Crisis investigation released on 31 August 2021 states, "due to lender's fossil fuel loan restrictions, transition to low carbon economy challenges and rapidly declining cost of and increasing consumer preference for alternative renewable energy, many coal and gas energy companies' present non renewable energy operations are at risk." Blast's current loan agreements contain strict liquidity, solvency and debt to total assets and interest coverage ratio covenant requirements. Based on previous year's financial statements, Blast has satisfied these ratio requirements. Blast's Directors want to maintain current finance arrangements and its generous employee bonus scheme.
You are part of the Blast financial reporting team and have been assigned the responsibility of considering the financial reporting and ethical implications of the Energy Industry in Crisis investigation findings on Blast's financial statements for the year ended 30 June 2022.
From an ethical perspective, consider the Energy Industry in Crisis investigation findings on the preparation of Blast's financial statements for the year ended 30 June 2022.
Problem (a) Identity and describe in your own words one (1) key fundamental ethical principle from APES 110 Code of Ethics for Professional Accountants that could be at risk for members when preparing Blast's financial statements for the year ended 30 June 2022. include specific paragraph reference(s) from APES 110; and
Problem (b) Referring to specific background information facts, explain why the principle would be at risk.
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