(Ethics) Physician Reference Service (PRS) Provides Services to Physicians Including Research

question 275

Essay

(Ethics)
Physician Reference Service (PRS) provides services to physicians including research assistance, diagnosis coding, and medical practice software including an advanced medical record cross-referencing system. PRS is aggressive in monitoring other firms' offerings and ensuring that its services are comparable to all others.
Because of its need to stay abreast of new product offerings, PRS spends a lot of money sending professionals to trade shows. In addition, PRS has agreements with several clients whereby the client requests a presentation of a competitor's services. A PRS employee poses as an employee of the client's office and attends the presentation, obtaining as much data and sample information as possible. The cost of the travel and attending presentations is charged to Product Development and expensed during the current year.
In April of this year, PRS began selling a software product substitute before the competitor's software was released. The competitor, Compu-Med, sued for copyright infringement and won. PRS had to withdraw its product from the market and pay $1.5 million in damages. PRS immediately negotiated an agreement with Compu-Med to sell Compu-Med's product (since it was prohibited from offering its own version for five years). This agreement cost an additional $1.3 million, but it allowed PRS to continue to offer a full line of services.
PRS' accountant, Kelly Hall, initially recorded the cash payments as "Loss from Lawsuit" and "Product Development," respectively. However, Gilbert Brown, the controller, instructed Kelly to create an intangible asset, named "Goodwill," and charge both costs to this account. "We're protected from another lawsuit as long as this agreement is in effect," he says. "It's about as close to goodwill as we'll ever get from our competitors. We might as well amortize the cost rather than take the full hit to income, anyway."
Required:
1. What are the ethical issues?
2. What should Kelly do?

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Definitions:

Boil

The process of heating a liquid to the temperature at which it turns to vapor.

Ideal Refrigerant

is a theoretical concept for a substance used in refrigeration that has optimal thermodynamic and physical properties, such as being non-toxic, environmentally friendly, and highly efficient in heat absorption and release.

Non-Combustible

Materials or substances that are incapable of igniting and burning, used in various safety applications to prevent fire.

Boil Temperatures

The temperature at which a liquid turns into vapor, which varies depending on the atmospheric pressure and the liquid's properties.