Solution Manual For
Intermediate Accounting Volume 2 8th Edition Thomas H. Beechy, Joan E.
Conrod, Elizabeth Farrell, Ingrid Mcleod-Dick, Kayla Tomulka, Romi-Lee Sevel
Chapter 12-22
Chapter 12: Financial Liabilities And Provisions
Case 12-1 Winter Fun Incorporated
12-2 Prescriptions Depot Limited
12-3 Camani Corporation
Suggested Time
Technical Review
TR12-1 Financial Liabilities And Provisions (IFRS) ...... 10
TR12-2 Financial Liabilities And Provisions (ASPE) ..... 10
TR12-3 Provision, Measurement ................................... 10
TR12-4 Guarantee ......................................................... 10
TR12-5 Provision, Warranty .......................................... 5
TR12-6 Foreign Currency .............................................. 5
TR12-7 Note Payable .................................................... 5
TR12-8 Discounting, Note Payable................................ 10
TR12-9 Discounting, Provision ..................................... 10
TR12-10 Classification, Liabilities................................... 10
Assignment A12-1 Financial Versus Non-Financial Liabilities……. 10
A12-2 Common Financial Liabilities………………… 10
A12-3 Common Financial Liabilities............................ 10
A12-4 Common Financial Liabilities: Taxes ................. 20
A12-5 Common Financial Liabilities: Taxes ................ 20
A12-6 Foreign Currency Payables……………………. 10
A12-7 Foreign Currency Payables ............................... 10
A12-8 Common Financial Liabilities And Foreign 25
Currency
A12-9 Provisions......................................................... 20
A12-10 Provisions ........................................................ 20
A12-11 Provisions......................................................... 20
A12-12 Provision Measurement .................................... 15
A12-13 Provision Measurement .................................... 15
A12-14 Provisions; Compensated Absences…………... 15
A12-15 Provisions; Compensated Absences .................. 15
A12-16 Provisions; Warranty ........................................ 15
A12-17 Provisions; Warranty ....................................... 20
A12-18 Provisions; Warranty ....................................... 25
© 2022 McGraw Hill Ltd. All rights reserved.
Solutions Manual to accompany Intermediate Accounting, Volume 2, 8th edition 14-1
, A12-19 Discounting; No-Interest Note ........................... 15
A12-20 Discounting; Low-Interest Note ........................ 20
A12-21 Discounting; Low-Interest Note ......................... 20
A12-22 Discounting; Provision..................................... 15
A12-23 Discounting; Provision..................................... 25
A12-24 Discounting; Provision..................................... 25
A12-25 Classification And SCF..................................... 20
A12-26 SCF .................................................................. 20
A12-27 Liabilities – IFRS And ASPE .......................... 10
A12-28 Liabilities - ASPE ........................................... 20
A12-29 Liabilities - ASPE ............................................ 20
A12-30 Provisions/Contingencies – IFRS And ASPE…. 20
A12-31 DAIS – Warranty Provision 15
Trend……………...
A12-32 DAIS – Provision For Coupon 15
Refund…………
Cases
Case 12-1 (LO12.3, LO12.5, LO12.6)
Winter Fun Incorporated
To: Members Of Board Of Directors
From: Accounting Consultant
RE: Winter Fun Incorporated
Overview
Winter Fun Incorporated (WFI) Uses IFRS For Financial Reporting. The Bank Loan Has
A Minimum Current Ratio So You Will Need To Be Careful And Watch For Any
Impacts On The Ratio. You Have Had A Tough Year This Year And Faced A Loss So
The Bank Financing Is Critical To Your Operations.
Issues
1. Revenue Recognition Memberships
2. Revenue Recognition Guests
3. Special Promotions
4. Coupons
5. Manufacturer Loan
6. Lawsuit
7. Warranty
8. Gasoline Storage Tanks
Solutions Manual to accompany Intermediate Accounting, Volume 2, 8th edition 14-2
, 9. Foreign Currency Payables
10. Compensated Absences
© 2022 Mcgraw Hill Ltd. All Rights Reserved.
Analysis And Recommendations
1. Revenue Recognition
Memberships Following The 5 Step
IFRS Model:
Initiation Fee
Step 1: The Contract With The Customer Is For The Membership In The Club. This
Would Be A Written Agreement Between The Member And WFI.
Step 2: There Is One Performance Obligation, The Promised Service Is Membership In
The Ski Club. There Is No Transfer Of The Service Until The Membership Is Provided.
Step 3: The Contract Price Is $10,000. The Non-Refundable Deposit Is An Advance
Payment Towards This Initiation Fee And Is Part Of The Overall Transaction Price.
Step 4: No Allocation Since There Is Only One Performance Obligation.
Step 5: The Performance Obligation For The Initiation Fee Is Satisfied Over The Period
Of Time That The Member Belongs To The Club. The $10,000 Would Be Recognized
Over The Average Period A Member Belongs. There Should Be Enough Historical Data
Available To Come Up With A Reasonable Estimate. There Would Be No Cash
Collection Risk Since The Amount Is Paid Upfront.
Annual Fee
Step 1: The Annual Fee Is A Written Agreement Between The Member And
WFI. Step 2: There Is Again One Performance Obligation, The Service For
This Year.
Step 3: The Fee Of $2,000 Is The Total Contract Price And Is Received In 20X5 For The
20X6 Ski Season. This Would Be Unearned Revenue When Received.
Step 4: There Is No Allocation Since There Is Only One Performance Obligation.
Step 5: Assuming The Ski Season Goes From Dec 1 Until March 31 $500 Would Be
Recognized In 20X5 And The Remainder In 20X6 Which Would Be The Period In
Which The Service Is Performed. There Would Be No Cash Collection Risk Since The
Amount Is Paid Upfront.
© 2022 McGraw Hill Ltd. All rights reserved.
Solutions Manual to accompany Intermediate Accounting, Volume 2, 8th edition 14-3
, 2. Revenue Recognition Guests
Following The 5 Step IFRS
Model:
Step 1: The Contract With The Guest Is The Written Contract When They Receive The
Ticket To Ski, Not When The Reservation Is Made Since This Reservation Could Be
Cancelled.
Step 2: The Performance Obligation Is The Right To Ski That
Day. Step 3: The Overall Contract Price Is The Price Of The
Ski Ticket.
Step 4: There Is No Allocation Since There Is Only One Performance Obligation.
Step 5: The Performance Would Be The Right To Ski On That Day. There Is No Cash
Collection Risk Since The Guest Pays By Credit Card When They Purchase The Ticket.
3. Special Promotions
Following The 5 Step IFRS
Model:
Step 1: The Contract With The Customer Is The Written Contract When They Receive
The Ticket And The Right To A Future Lesson.
Step 2: There Are Two Separate Performance Obligations The Right To Ski And The
Right To The Lesson.
Step 3: The Total Contract Price Is $100.
Step 4: This Price Would Need To Be Allocated To The Two Separate Performance
Obligations Based On Their Relative Fair Value.
Fair Value Ski Pass 80 = 61.5% X 100 = $61.50
Fair Value Lesson 50 = 38.5% X 100 = $38.50
Total Fair Value 130
Step 5: The $61.50 Allocated To The Performance Obligation For The Ski Pass Would
Be Satisfied On The Day That They Ski. For The $38.50, The Performance Obligation
Would Be Satisfied On The Day They Take The Lesson. There Would Be No Cash
Collection Risk Assuming A Credit Card Is Used To Purchase The Special Pass.
Solutions Manual to accompany Intermediate Accounting, Volume 2, 8th edition 14-4
Intermediate Accounting Volume 2 8th Edition Thomas H. Beechy, Joan E.
Conrod, Elizabeth Farrell, Ingrid Mcleod-Dick, Kayla Tomulka, Romi-Lee Sevel
Chapter 12-22
Chapter 12: Financial Liabilities And Provisions
Case 12-1 Winter Fun Incorporated
12-2 Prescriptions Depot Limited
12-3 Camani Corporation
Suggested Time
Technical Review
TR12-1 Financial Liabilities And Provisions (IFRS) ...... 10
TR12-2 Financial Liabilities And Provisions (ASPE) ..... 10
TR12-3 Provision, Measurement ................................... 10
TR12-4 Guarantee ......................................................... 10
TR12-5 Provision, Warranty .......................................... 5
TR12-6 Foreign Currency .............................................. 5
TR12-7 Note Payable .................................................... 5
TR12-8 Discounting, Note Payable................................ 10
TR12-9 Discounting, Provision ..................................... 10
TR12-10 Classification, Liabilities................................... 10
Assignment A12-1 Financial Versus Non-Financial Liabilities……. 10
A12-2 Common Financial Liabilities………………… 10
A12-3 Common Financial Liabilities............................ 10
A12-4 Common Financial Liabilities: Taxes ................. 20
A12-5 Common Financial Liabilities: Taxes ................ 20
A12-6 Foreign Currency Payables……………………. 10
A12-7 Foreign Currency Payables ............................... 10
A12-8 Common Financial Liabilities And Foreign 25
Currency
A12-9 Provisions......................................................... 20
A12-10 Provisions ........................................................ 20
A12-11 Provisions......................................................... 20
A12-12 Provision Measurement .................................... 15
A12-13 Provision Measurement .................................... 15
A12-14 Provisions; Compensated Absences…………... 15
A12-15 Provisions; Compensated Absences .................. 15
A12-16 Provisions; Warranty ........................................ 15
A12-17 Provisions; Warranty ....................................... 20
A12-18 Provisions; Warranty ....................................... 25
© 2022 McGraw Hill Ltd. All rights reserved.
Solutions Manual to accompany Intermediate Accounting, Volume 2, 8th edition 14-1
, A12-19 Discounting; No-Interest Note ........................... 15
A12-20 Discounting; Low-Interest Note ........................ 20
A12-21 Discounting; Low-Interest Note ......................... 20
A12-22 Discounting; Provision..................................... 15
A12-23 Discounting; Provision..................................... 25
A12-24 Discounting; Provision..................................... 25
A12-25 Classification And SCF..................................... 20
A12-26 SCF .................................................................. 20
A12-27 Liabilities – IFRS And ASPE .......................... 10
A12-28 Liabilities - ASPE ........................................... 20
A12-29 Liabilities - ASPE ............................................ 20
A12-30 Provisions/Contingencies – IFRS And ASPE…. 20
A12-31 DAIS – Warranty Provision 15
Trend……………...
A12-32 DAIS – Provision For Coupon 15
Refund…………
Cases
Case 12-1 (LO12.3, LO12.5, LO12.6)
Winter Fun Incorporated
To: Members Of Board Of Directors
From: Accounting Consultant
RE: Winter Fun Incorporated
Overview
Winter Fun Incorporated (WFI) Uses IFRS For Financial Reporting. The Bank Loan Has
A Minimum Current Ratio So You Will Need To Be Careful And Watch For Any
Impacts On The Ratio. You Have Had A Tough Year This Year And Faced A Loss So
The Bank Financing Is Critical To Your Operations.
Issues
1. Revenue Recognition Memberships
2. Revenue Recognition Guests
3. Special Promotions
4. Coupons
5. Manufacturer Loan
6. Lawsuit
7. Warranty
8. Gasoline Storage Tanks
Solutions Manual to accompany Intermediate Accounting, Volume 2, 8th edition 14-2
, 9. Foreign Currency Payables
10. Compensated Absences
© 2022 Mcgraw Hill Ltd. All Rights Reserved.
Analysis And Recommendations
1. Revenue Recognition
Memberships Following The 5 Step
IFRS Model:
Initiation Fee
Step 1: The Contract With The Customer Is For The Membership In The Club. This
Would Be A Written Agreement Between The Member And WFI.
Step 2: There Is One Performance Obligation, The Promised Service Is Membership In
The Ski Club. There Is No Transfer Of The Service Until The Membership Is Provided.
Step 3: The Contract Price Is $10,000. The Non-Refundable Deposit Is An Advance
Payment Towards This Initiation Fee And Is Part Of The Overall Transaction Price.
Step 4: No Allocation Since There Is Only One Performance Obligation.
Step 5: The Performance Obligation For The Initiation Fee Is Satisfied Over The Period
Of Time That The Member Belongs To The Club. The $10,000 Would Be Recognized
Over The Average Period A Member Belongs. There Should Be Enough Historical Data
Available To Come Up With A Reasonable Estimate. There Would Be No Cash
Collection Risk Since The Amount Is Paid Upfront.
Annual Fee
Step 1: The Annual Fee Is A Written Agreement Between The Member And
WFI. Step 2: There Is Again One Performance Obligation, The Service For
This Year.
Step 3: The Fee Of $2,000 Is The Total Contract Price And Is Received In 20X5 For The
20X6 Ski Season. This Would Be Unearned Revenue When Received.
Step 4: There Is No Allocation Since There Is Only One Performance Obligation.
Step 5: Assuming The Ski Season Goes From Dec 1 Until March 31 $500 Would Be
Recognized In 20X5 And The Remainder In 20X6 Which Would Be The Period In
Which The Service Is Performed. There Would Be No Cash Collection Risk Since The
Amount Is Paid Upfront.
© 2022 McGraw Hill Ltd. All rights reserved.
Solutions Manual to accompany Intermediate Accounting, Volume 2, 8th edition 14-3
, 2. Revenue Recognition Guests
Following The 5 Step IFRS
Model:
Step 1: The Contract With The Guest Is The Written Contract When They Receive The
Ticket To Ski, Not When The Reservation Is Made Since This Reservation Could Be
Cancelled.
Step 2: The Performance Obligation Is The Right To Ski That
Day. Step 3: The Overall Contract Price Is The Price Of The
Ski Ticket.
Step 4: There Is No Allocation Since There Is Only One Performance Obligation.
Step 5: The Performance Would Be The Right To Ski On That Day. There Is No Cash
Collection Risk Since The Guest Pays By Credit Card When They Purchase The Ticket.
3. Special Promotions
Following The 5 Step IFRS
Model:
Step 1: The Contract With The Customer Is The Written Contract When They Receive
The Ticket And The Right To A Future Lesson.
Step 2: There Are Two Separate Performance Obligations The Right To Ski And The
Right To The Lesson.
Step 3: The Total Contract Price Is $100.
Step 4: This Price Would Need To Be Allocated To The Two Separate Performance
Obligations Based On Their Relative Fair Value.
Fair Value Ski Pass 80 = 61.5% X 100 = $61.50
Fair Value Lesson 50 = 38.5% X 100 = $38.50
Total Fair Value 130
Step 5: The $61.50 Allocated To The Performance Obligation For The Ski Pass Would
Be Satisfied On The Day That They Ski. For The $38.50, The Performance Obligation
Would Be Satisfied On The Day They Take The Lesson. There Would Be No Cash
Collection Risk Assuming A Credit Card Is Used To Purchase The Special Pass.
Solutions Manual to accompany Intermediate Accounting, Volume 2, 8th edition 14-4
