please responde to the questions in the end
You are the chief financial officer (CFO) of a publicly traded company engaging in pharmaceutical R&D and manufacturing related to new drug therapies. Most of your sales revenue is derived from sales to U.S. hospitals and clinics, but a significant amount comes from other world-wide sales to foreign countries (approximately 85% domestic sales, 15% foreign sales).
Your company is very close to what your chief scientist calls “A significant breakthrough in Alzheimer’s research”, as well as new therapies for diabetes and cancer.
A congressional bill has passed through congress, and signed by the president, offering up to a 20% federal tax credit for new drug R&D and manufacturing activities related to COVID-19 specified research and manufacturing (qualifying activities to be specific in Proposed Regulations to be issued by the Treasury Department under a 30 day streamlined procedure, which will allow for only a short and reduced period for scientific and public comment). Additionally the tax credit is allowed only for domestic research and manufacturing, foreign research and manufacturing does not qualify for the credit under the new legislation. Your current research activities are conducted in both the United States and Canada, and you have a large manufacturing plant in Mexico which employs over 1,000 people. Manufacturing could be shifted to the US but will require significant disruption to current processes in place; however, after consultation with your manufacturing managers you expect you could reconfigure your processes and still realize a 12% increase in overall net income after consideration of the new US tax credit.
- Based upon what you have learned so far in this semester what impact may this bill have on your accounting, R&D, and manufacturing operations. Be as specific as possible in your response citing examples from chapter readings and/or class discussions. (Do the best you can with this; I know it’s somewhat vague, but I want to get you thinking).
- What are the financial & cost accounting implications?
- Are there ethical considerations? What are they? How do you resolve?
- As CFO what is your plan? Why? What other information would you like to have before implementing a plan?
- You only have 2 pages, 12 point font, single spaced in which to respond. Make your writing concise.
