Chapter 3: Processing Data Through the Accounting System

http://www.financialpost.com/news-sectors/trading-desk/energy/story.html?id=2458991

SUMMARY

Sunoco, a natural gas company based in Ontario has launched a two million dollar law suit against Suncor Energy Company. A representative from Suncor said they received the statements on Monday and have no comments about this case until they go to court. The company claims that Suncor made an internal announcement last week planning to shut down all three hundred Sunoco retailers in Ontario. Suncor plans to sell one hundred of the retail locations in April and rebrand the rest under the Petro-Canada name. The retail company Sunoco is arguing that Suncor violated the Ontario franchise legislation and prevented them from invalidating an agreement for the compensation.

CONNECTION

In chapter three, we looked more in depth into the accounting system. The chapter covers the whole accounting cycle from analyzing transactions to preparing financial statements. We were introduced to the multi-step income statement format, which ties into the article summarized above. Since Sunoco is filing a two million dollar law suit against Suncor Energy Company for violating their franchise agreements, Suncor will now have to disclose the information in their financial statements. In the multi-step income statement, there is a category called extraordinary items. An extraordinary item is one that is not typical in the company’s business activities and can not be controlled by the company’s owners or managers. If the court approves of the lawsuit filed by Sunoco, Suncor will have to list the two million dollar loss under extraordinary items on their income statement so the users of the financial statements may be informed of this event.

REFLECTION

It is unethical that Suncor Energy Company is conducting internal activities to shut down Sunoco. If Sunoco had an agreement with Suncor, it would be most ethical to consult the company before taking drastic actions. Since last August when Suncor and Petro-Canada officially merged, they are now the largest energy company in Canada. Suncor now has more confidence in taking risky maneuvers because of their domination in the market place. From the actions of Suncor, it is clear that they are seeking an even higher market share for energy because they are planning to rebrand most of the retail locations of Sunoco after they are forced to shut down. If the courts does not approve of the lawsuit, Suncor could have a monopoly over the market for energy in both Ontario and Canada.