The income statement of Royal Bank of Singapore reported the following results of operations:
|
Earnings before income taxes and extraordinary gain |
$187,046 |
|
Income tax expense |
72,947 |
|
Earnings before extraordinary gain |
114,099 |
|
Extraordinary gain, net of income tax |
419,557 |
|
Net earnings |
$533,656 |
Suppose Royal Bank’s management had reported the company’s results of operations in this manner:
|
Earnings before income taxes |
$847,111 |
|
Income tax expense |
352,651 |
|
Net earnings |
$494,460 |
Required
1. Does it really matter how a company reports its operating results? Why? Who could be helped by management’s action? Who could be hurt?
2. Suppose Royal Bank’s management decides to report its operating results in the second manner. Evaluate the ethics of this decision.