COMPLETE SOLUTION MANUAL FOR MODERN
. . . . .
ADVANCED ACCOUNTING IN CANADA 9TH EDI
. . . . .
TION HILTON MURRAY,
. .
HERAUF DARRELL
. .
Chapter 1 Conceptual . . .
&Case Analysis
. .
Frameworks for Financial Reporting . . .
A brief description of the major points covered in each case and problem. CASE
. . . . . . . . . . . . .
S
Case.1-1
In.this.case,.students.are.introduced.to.the.difference.in.accounting.for.R&D.costs.between.IFR
S.and.ASPE.and.asked.to.provide.arguments.to.support.the.different.standards.
Case.1-2. (adapted.from.a.case.prepared.by.Peter.Secord,.Saint.Mary’s.University)
In.this.real.life.case,.students.are.asked.to.discuss.the.merits.of.historical.costs.vs..replacement.costs
.. Actual.note.disclosure.from.a.company’s.financial.statements.is.provided.as.background.material.
Case.1-3. (adapted.from.a.case.prepared.by.Peter.Secord,.Saint.Mary’s.University)
Copyright.©.2019.McGraw-Hill.Education..All.rights.reserved.
Solutions.Manual,.Chapter.6 1
,A.Canadian.company.has.just.acquired.a.non-
controlling.interest.in.a.U.S..public.company..It.must.decide.whether.to.use.IFRS.or.U.S..GAAP.for.the
. U.S..subsidiary..Financial.statement.information.is.provided.under.IFRS.and.U.S..GAAP.. The.reaso
ns.for.some.of.the.differences.in.numbers.must.be.explained.and.an.opinion.provided.as.to.which.met
hod.best.reflects.economic.reality.
Case.1-4
This.case.is.adapted.from.a.CPA.Canada.case.. A.private.company.is.planning.to.go.public..Analysis.
and.recommendations.are.required.for.accounting.issues.related.to.purchase.and.installation.of.new.
information.system,.revenue.recognition,.convertible.debentures.and.doubtful.accounts.receivable.
Case.1-5
This.case.is.adapted.from.a.CPA.Canada.case.. A.private.company.is.planning.to.transition. from.AS
PE.to.IFRS..Analysis.and.recommendations.are.required.for.accounting.issues.related.to.convertible
. debentures,.unusual.item,.revenue.recognition,.contingency.and.impairment.
Copyright.©.2019.McGraw-Hill.Education..All.rights.reserved..2
Modern.Advanced.Accounting.in.Canada,.Ninth.Edition
,PROBLEMS
Problem.1-1 (40.min.)
A.single.asset.is.acquired..Students.are.asked.to.prepare.and.compare.financial.statement.numbers.
during.the.life.of.the.asset.using.both.a.historical.cost.and.a.current.value.model.
Problem.1-2 (40.min.)
Details.of.a.European.company.that.reports.using.IFRS.are.given.along.with.specific.details.relating.t
o.certain.account.balances.. Students.are.asked.to.show.how.these.balances.should. be.reported.un
der.1).ASPE.and.2).IFRS.using.the.facts.provided.. Students.are.also.asked.to.reconcile.Net.Income.a
nd.Shareholders`.Equity.from.IFRS.to.ASPE.
Problem.1-3 (50.min.)
A.private.company.plans.to.convert.to. IFRS.go.public.within.5.years..It.wants.to.know.the. impact.on.n
et.income.and.shareholders’.equity.if.it.converts.from.ASPE.to.IFRS.for.impaired.loans,.interest.costs
,.actuarial.gains,.compound.financial.instrument.and.income.taxes.
Problem.1-4 (50.min.)
While.taking.the.role.of.a.financial.analyst,.the.student.uses.vertical.and.horizontal.analysis.and.ratios
. to.analyse.and.interpret.the.profitability,.solvency.and.liquidity.of.a.private.company.
Problem.1-5 (25.min.)
A.private.company.plans.to.convert.to.IFRS..It.wants.to.know.the.impact.on.three.key.ratios.if.it.convert
s.from.ASPE.to.IFRS.for.impaired.loans,.capitalization.of.interest.and.actuarial.gains/losses.
Problem.1-6 (50.min.)
A.private.company.plans.to.convert.from.ASPE.to.IFRS.and.wants.to.know.the.impact.on.three.key.rati
os.if.it.converts.from.ASPE.to.IFRS.for.impairment.losses,.convertible.bonds.and.income.taxes.
Copyright.©.2019.McGraw-Hill.Education..All.rights.reserved.
Solutions.Manual,.Chapter.6 3
, SOLUTIONS TO REVIEW QUESTIONS
. . .
1. There.are.times.when. external.users.may.want.financial.reports.that.do.not.follow.GAAP.. For.exa
mple,.users.may.need.financial.statements.using.non-
GAAP.accounting.policies.required.for.legislative.or.regulatory.purposes,.or.for.contract.complia
nce..A.prospective.lender.may.want.to.receive.a.balance.sheet.with.assets.reported.at.fair.value.r
ather.than.historical.cost..Accountants.have.the.skills.and.abilities.to.provide.financial.informatio
n.in.a.variety.of.formats.or.using.a.variety.of.accounting.policies..When.the.financial.statements.us
e.non-
GAAP.accounting.policies,.the.accounting.policies.must.be.disclosed. in.the. notes. to.the.financia
l.statements..The.accountant’s.report.would.make.reference.to.these.accounting.policies.
2. The.three.main.areas.where.judgment.needs.to.be.applied.are.as.follows:
- Choosing.accounting.policies.that.are.appropriate.for.the.company’s.situation
- Making. estimates. to. accurately. reflect. the. company’s. financial. position. and. results. of.op
erations
- Deciding.what.to.disclose.and.how.to.disclose.it.in.the.notes.to.the.financial.statements.
3. The.GAAP-
based.financial.statements.are.prepared.primarily.for.the.benefit.of.external.users..The.financial.s
tatements.provide.a.summary.of.the.financial.position.and.results.of.operations.for.the.company..
Management.has.access.to.the.detailed.information.available.within.the.company..Therefore,.th
e.formal.financial.statements.should.give.priority.to.the.needs.of.the.external.users.
4. The.main.reason.the.Accounting.Standards.Board.decided.to.create.a.separate.section.of.the.CP
A.Canada.Handbook.for.private.enterprises.was.to.address.the.cost/benefit.discrepancy.with.res
pect.to.smaller.private.companies’.ability.to.comply.with.GAAP.. GAAP.has.become.increasingly.
complex.and.for.smaller.private.enterprises.this.often.means.that.the.cost.of.complying.with.such.
requirements.outweighs.the.benefit.received.from.compliance.. In.2002,.the.AcSB.adopted.differ
ential.reporting,.which.allowed.private.enterprises.choices.with.the.respect.to.certain.complex.ac
counting.standards.(e.g..the. option.to.use.the.cost.method.for.investments.that.would.otherwise.
require.the.equity.method)..In.2009,.the.AcSB.decided.to.create.a.self-
contained.set.of.standards.for.private.enterprises..These.standards.were.effective.for.fiscal.perio
ds.beginning.on.or.after.January.1,.2011.
5. There. are. a. few. reasons. why. a. private. company. would. want. to. comply. with. IFRS. even
though.it.is.not.required.to.do. so.. It.may.have.plans.to.become.publicly.listed. at.some. point
Copyright.©.2019.McGraw-Hill.Education..All.rights.reserved..4
Modern.Advanced.Accounting.in.Canada,.Ninth.Edition
. . . . .
ADVANCED ACCOUNTING IN CANADA 9TH EDI
. . . . .
TION HILTON MURRAY,
. .
HERAUF DARRELL
. .
Chapter 1 Conceptual . . .
&Case Analysis
. .
Frameworks for Financial Reporting . . .
A brief description of the major points covered in each case and problem. CASE
. . . . . . . . . . . . .
S
Case.1-1
In.this.case,.students.are.introduced.to.the.difference.in.accounting.for.R&D.costs.between.IFR
S.and.ASPE.and.asked.to.provide.arguments.to.support.the.different.standards.
Case.1-2. (adapted.from.a.case.prepared.by.Peter.Secord,.Saint.Mary’s.University)
In.this.real.life.case,.students.are.asked.to.discuss.the.merits.of.historical.costs.vs..replacement.costs
.. Actual.note.disclosure.from.a.company’s.financial.statements.is.provided.as.background.material.
Case.1-3. (adapted.from.a.case.prepared.by.Peter.Secord,.Saint.Mary’s.University)
Copyright.©.2019.McGraw-Hill.Education..All.rights.reserved.
Solutions.Manual,.Chapter.6 1
,A.Canadian.company.has.just.acquired.a.non-
controlling.interest.in.a.U.S..public.company..It.must.decide.whether.to.use.IFRS.or.U.S..GAAP.for.the
. U.S..subsidiary..Financial.statement.information.is.provided.under.IFRS.and.U.S..GAAP.. The.reaso
ns.for.some.of.the.differences.in.numbers.must.be.explained.and.an.opinion.provided.as.to.which.met
hod.best.reflects.economic.reality.
Case.1-4
This.case.is.adapted.from.a.CPA.Canada.case.. A.private.company.is.planning.to.go.public..Analysis.
and.recommendations.are.required.for.accounting.issues.related.to.purchase.and.installation.of.new.
information.system,.revenue.recognition,.convertible.debentures.and.doubtful.accounts.receivable.
Case.1-5
This.case.is.adapted.from.a.CPA.Canada.case.. A.private.company.is.planning.to.transition. from.AS
PE.to.IFRS..Analysis.and.recommendations.are.required.for.accounting.issues.related.to.convertible
. debentures,.unusual.item,.revenue.recognition,.contingency.and.impairment.
Copyright.©.2019.McGraw-Hill.Education..All.rights.reserved..2
Modern.Advanced.Accounting.in.Canada,.Ninth.Edition
,PROBLEMS
Problem.1-1 (40.min.)
A.single.asset.is.acquired..Students.are.asked.to.prepare.and.compare.financial.statement.numbers.
during.the.life.of.the.asset.using.both.a.historical.cost.and.a.current.value.model.
Problem.1-2 (40.min.)
Details.of.a.European.company.that.reports.using.IFRS.are.given.along.with.specific.details.relating.t
o.certain.account.balances.. Students.are.asked.to.show.how.these.balances.should. be.reported.un
der.1).ASPE.and.2).IFRS.using.the.facts.provided.. Students.are.also.asked.to.reconcile.Net.Income.a
nd.Shareholders`.Equity.from.IFRS.to.ASPE.
Problem.1-3 (50.min.)
A.private.company.plans.to.convert.to. IFRS.go.public.within.5.years..It.wants.to.know.the. impact.on.n
et.income.and.shareholders’.equity.if.it.converts.from.ASPE.to.IFRS.for.impaired.loans,.interest.costs
,.actuarial.gains,.compound.financial.instrument.and.income.taxes.
Problem.1-4 (50.min.)
While.taking.the.role.of.a.financial.analyst,.the.student.uses.vertical.and.horizontal.analysis.and.ratios
. to.analyse.and.interpret.the.profitability,.solvency.and.liquidity.of.a.private.company.
Problem.1-5 (25.min.)
A.private.company.plans.to.convert.to.IFRS..It.wants.to.know.the.impact.on.three.key.ratios.if.it.convert
s.from.ASPE.to.IFRS.for.impaired.loans,.capitalization.of.interest.and.actuarial.gains/losses.
Problem.1-6 (50.min.)
A.private.company.plans.to.convert.from.ASPE.to.IFRS.and.wants.to.know.the.impact.on.three.key.rati
os.if.it.converts.from.ASPE.to.IFRS.for.impairment.losses,.convertible.bonds.and.income.taxes.
Copyright.©.2019.McGraw-Hill.Education..All.rights.reserved.
Solutions.Manual,.Chapter.6 3
, SOLUTIONS TO REVIEW QUESTIONS
. . .
1. There.are.times.when. external.users.may.want.financial.reports.that.do.not.follow.GAAP.. For.exa
mple,.users.may.need.financial.statements.using.non-
GAAP.accounting.policies.required.for.legislative.or.regulatory.purposes,.or.for.contract.complia
nce..A.prospective.lender.may.want.to.receive.a.balance.sheet.with.assets.reported.at.fair.value.r
ather.than.historical.cost..Accountants.have.the.skills.and.abilities.to.provide.financial.informatio
n.in.a.variety.of.formats.or.using.a.variety.of.accounting.policies..When.the.financial.statements.us
e.non-
GAAP.accounting.policies,.the.accounting.policies.must.be.disclosed. in.the. notes. to.the.financia
l.statements..The.accountant’s.report.would.make.reference.to.these.accounting.policies.
2. The.three.main.areas.where.judgment.needs.to.be.applied.are.as.follows:
- Choosing.accounting.policies.that.are.appropriate.for.the.company’s.situation
- Making. estimates. to. accurately. reflect. the. company’s. financial. position. and. results. of.op
erations
- Deciding.what.to.disclose.and.how.to.disclose.it.in.the.notes.to.the.financial.statements.
3. The.GAAP-
based.financial.statements.are.prepared.primarily.for.the.benefit.of.external.users..The.financial.s
tatements.provide.a.summary.of.the.financial.position.and.results.of.operations.for.the.company..
Management.has.access.to.the.detailed.information.available.within.the.company..Therefore,.th
e.formal.financial.statements.should.give.priority.to.the.needs.of.the.external.users.
4. The.main.reason.the.Accounting.Standards.Board.decided.to.create.a.separate.section.of.the.CP
A.Canada.Handbook.for.private.enterprises.was.to.address.the.cost/benefit.discrepancy.with.res
pect.to.smaller.private.companies’.ability.to.comply.with.GAAP.. GAAP.has.become.increasingly.
complex.and.for.smaller.private.enterprises.this.often.means.that.the.cost.of.complying.with.such.
requirements.outweighs.the.benefit.received.from.compliance.. In.2002,.the.AcSB.adopted.differ
ential.reporting,.which.allowed.private.enterprises.choices.with.the.respect.to.certain.complex.ac
counting.standards.(e.g..the. option.to.use.the.cost.method.for.investments.that.would.otherwise.
require.the.equity.method)..In.2009,.the.AcSB.decided.to.create.a.self-
contained.set.of.standards.for.private.enterprises..These.standards.were.effective.for.fiscal.perio
ds.beginning.on.or.after.January.1,.2011.
5. There. are. a. few. reasons. why. a. private. company. would. want. to. comply. with. IFRS. even
though.it.is.not.required.to.do. so.. It.may.have.plans.to.become.publicly.listed. at.some. point
Copyright.©.2019.McGraw-Hill.Education..All.rights.reserved..4
Modern.Advanced.Accounting.in.Canada,.Ninth.Edition
