Reference no: EM132007171

Question - Jabinski Company's research and development department has identified a concept as a potential project that it believes will lead to a new product. The R&D department feels the new product can become very profitable. Due to the required investment needed for this project, approval from the vice president of finance, Jim Jones, is required. Jones is aware that company profits have been down and as a result is somewhat reluctant to approve a project that will incur a significant amount of expenses. Further, these expenses cannot be capitalized in accordance with GAAP. Jones also knows that if an outside firm is hired to perform the work and obtains a patent for the process, Jabinski Company can then purchase the patent from the outside firm and subsequently record the expenditure as an intangible asset. Jones is also aware that the company's own R&D department is top notch, and he is confident that they can do the work with little difficulties.

What are the ethical issues, if any, involved?

What would you recommend that Jones do and why?