The Impact of Bonus Incentive Scheme on Financial Statements

The impact of a bonus
incentive scheme on
the financial
statements

Table of Contents
(a) Stakeholders of company.......................................................................................................3
(b) Why did Freda ask Lucia to do this?......................................................................................3
(C) What are the ethical issues involved?....................................................................................4
(D) Can Lucia defer revenues and accrue as many expenses as possible and still be ethical?....4
REFERENCES................................................................................................................................6

(a) Stakeholders of company
Stakeholders are the individuals or person who have interest or stake in business and its
operations. The company or entity has two types of stakeholders which are internal and external
stakeholders. Internal stakeholders are people whose interest within the organization comes
through direct relationship and includes owners, employees, investors. External stakeholders are
person who don't have direct relationship with the entity but are directly or indirectly impacted
by actions of organization and has power to impact business through their actions (Choudhury
and Pattnaik, 2020). External stakeholders includes suppliers, creditors, customers, government,
etc. The stakeholders who are mentioned in the case are employees and government.
The employees are Lucia who is an accountant of Vroom Ltd. and Freda who is a manger
of Lucia and there is also a small information regarding apprentice mechanics who are also
employees and stakeholder of company. Both are internal stakeholders of company and can
directly impact company and its business through their actions. They play a crucial role in
success and failure of business. The employees of the company are also impacted by actions of
company and this is the reason that they have high interest in profit margin and success of
business (Derakhshan, Turner and Mancini, 201). Government who is the another stakeholder
and external stakeholder of Vroom Ltd. Government don't have any direct interest in company
but actions of government can impact the business and its operations. The government of are
providing government grants which are used for training apprentice mechanics which enables
company to increase profit and this amount also give tax benefit to company. The grants
provided by government has a positive impact on profitability of company.
(b) Why did Freda ask Lucia to do this?
Government grants provided by government for training apprentice mechanics has a very
good benefit for company. The grant provides opportunity to company to provide training to its
employees which can will provide future benefit to company and this training can improve
performance of employees (Lee, Park and Gong, 2022). Another benefit of grant is that it
provides tax benefit of $100000. But it is evaluated that the increase in profit can lead to
stoppage of government grants. This can be a loss for company as it has to take money from
company revenue to train apprentice and another loss is it will not be able to take tax benefit. To
avoid these losses Freda had given solution to Lucia to show less profit by increasing expenses.