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Nathalie Johnstone jt
University of Saskatchewan jt jt
Advanced Financial Ac jt jt
countinginCanada jt jt
SecondEdition jt
NathalieJohnstone,KristieDewald, a
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nd Cheryl Wilson
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ISBN: A103000354295
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Table of Contents
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1 Introduction to Advanced Financial Accounting
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2 Accounting for Non-Controlled Investments
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3 Introduction to Business Combinations
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4 Control Investments: Subsequent Measurements with Wholly Owned Investments
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5 Control Investments: Intercompany Transactions with Wholly Owned Subsidiaries
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,ii
6 Control Investment of Non-Wholly Owned Subsidiaries jt jt jt jt jt
7 Accounting for Associates (Revisited) and Joint Arrangements jt jt jt jt jt jt
8 Control Investments—Other Reporting Issues jt jt jt
9 Foreign Currency Transactions jt jt
10 Translation and Consolidation of Foreign Operations jt jt jt jt jt
11 Accounting for Not-for-Profit Organization jt jt jt
Advanced Financial Accounting in Canada, 2Ce (Johnstone) Chapte jt jt jt jt jt jt jt
r 1 Introduction to Advanced Financial Accounting
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1.1 Describe the accounting standards used in Canada and how they apply to different rep jt jt jt jt jt jt jt jt jt jt jt jt jt
orting entities. jt
1) A private company in Canada that is closely held, has no debt, and wants to simplify the acc
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ounting process is most likely to report under which part of the CPA Canada Handbook?
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A) Part II — Accounting Standards for Private Enterprises (ASPE)
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B) Part IV — Accounting Standards for Pensions
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C) Part I — International Financial Reporting Standards (IFRS)
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D) Part III — Accounting Standards for Not-for-
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Profit Organizations Answer: A jt jt j t
Diff: 1 Type: MC jt j t jt
Taxonomy Category: Understanding jt j t
Learning Outcome: 1.1 Describe the accounting standards used in Canada and how they apply to differe
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nt reporting entities.
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2) In Canada, a private company has the choice to report under International Financial Reporting St
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andards (IFRS) or Accounting Standards for Private Enterprises (ASPE). Describe why the CPA Cana
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da Handbook provides the option for private enterprises.
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Answer: IFRS is meant to create consistency and comparability in international markets. One of the limi
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tations of IFRS is the complexity of reporting for equity investments that are meant to provide informati
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on to shareholders for decision-
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making purposes. Many private companies are held by a small group of shareholders who are often inv
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olved in the running of the business or have access to that information. As a result, the cost of applying m
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ore complex accounting policies outweighs the benefit of the information provided to this closely held g
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roup of shareholders. To address this, the Accounting Standards Board developed the Accounting Stand
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ards for Private Enterprises to meet the needs of private enterprises. Private enterprises have the option t
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o adopt IFRS or ASPE depending on the needs of the financial statement users.
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Diff: 2 Type: ES jt j t jt
Taxonomy Category: Understanding jt j t
Learning Outcome: 1.1 Describe the accounting standards used in Canada and how they apply to differe
jt j t jt jt jt jt jt jt jt jt jt jt jt jt jt
nt reporting entities.
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Copyright © 2026 Pearson Canada Inc.
, Open-Book Testing: Why It Makes Sense iii
3) What are the four parts of the CPA Canada Handbook —
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Accounting and which entities are they applicable to?
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Answer: The four parts are: j t jt jt jt
• Part I — International Financial Reporting Standards (IFRS) —
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applicable to publicly accountable, private, or not-for-profit entities.
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• Part II — Accounting Standards for Private Enterprises (ASPE) — applicable to private entities.
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• Part III — Accounting Standards for Not-for-Profit Organizations — applicable to not-for-
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profit entities. jt
• Part IV — Accounting Standards for Pension Plans —
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applicable to pension plans. Diff: 1 Type: ES
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Taxonomy Category: Remembering jt j t
Learning Outcome: 1.1 Describe the accounting standards used in Canada and how they apply to dif
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ferent reporting entities.
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4) In 2011, Canada adopted International Financial Reporting Standards (IFRS) for publicly ac
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countable enterprises. Explain the rationale for adopting IFRS in Canada.
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Answer: As the global economy expanded, the Accounting Standards Board (AcSB) chose to adopt IFRS
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in Canada to improve consistency and comparability in the international capital markets.
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Diff: 1 Type: ES
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Taxonomy Category: Understanding jt j t
Learning Outcome: 1.1 Describe the accounting standards used in Canada and how they apply to dif
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ferent reporting entities.
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1.2 Define, identify, and classify strategic and non- jt jt jt jt jt jt
strategic intercorporate investments made by reporting entities.
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1) Laliberte Products Ltd. (LPL), a public company, made several equity investments in the current ye
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ar. Which of the following investments would most likely be classified as an associate in LPL's financi
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al statements?
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A) 25,000 of the 30,000 outstanding voting common shares of Glabman Inc. There are significant int
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ercompany transactions between the two companies. jt jt jt jt jt
B) 13,500 of the 45,000 outstanding voting common shares of CCL Ltd. There are significant int
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ercompany transactions between the two companies. jt jt jt jt jt
C) 1,000 of the 20,000 outstanding voting common shares of Petruck Inc. There are no transactions bet
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ween the two corporations and LPL plans to hold these shares for less than a year.
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D) 3,000 of the 3,500 outstanding non- jt jt jt jt jt
voting preferred shares of Paradise Ltd. There is a small number of intercompany transactions be
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tween the two companies. jt jt jt
Answer: B j t
Diff: 2 Type: MC
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Taxonomy Category: Analyzing jt j t
Learning Outcome: 1.2 Define, identify, and classify strategic and non-
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strategic intercorporate investments made by reporting entities.
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2) Which of the following is NOT an indicator of significant influence?
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A) There are significant intercompany transactions between the investor and investee.
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B) The investor has the ability to shape the policies of the investee.
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C) The investor and investee are located in the same city and use the same legal firm.
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D) The ability to choose representation on the investee's board of directors or governing body.
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, iv
Answer: C j t
Diff: 1 Type: MC
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Taxonomy Category: Understanding
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Learning Outcome: 1.2 Define, identify, and classify strategic and non-
jt j t jt jt jt jt jt jt jt
strategic intercorporate investments made by reporting entities.
jt jt jt jt jt jt
Copyright © 2026 Pearson Canada Inc.
Nathalie Johnstone jt
University of Saskatchewan jt jt
Advanced Financial Ac jt jt
countinginCanada jt jt
SecondEdition jt
NathalieJohnstone,KristieDewald, a
jt jt jt jt
nd Cheryl Wilson
jt jt
ISBN: A103000354295
jt
Table of Contents
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1 Introduction to Advanced Financial Accounting
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2 Accounting for Non-Controlled Investments
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3 Introduction to Business Combinations
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4 Control Investments: Subsequent Measurements with Wholly Owned Investments
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5 Control Investments: Intercompany Transactions with Wholly Owned Subsidiaries
jt jt jt jt jt jt jt
,ii
6 Control Investment of Non-Wholly Owned Subsidiaries jt jt jt jt jt
7 Accounting for Associates (Revisited) and Joint Arrangements jt jt jt jt jt jt
8 Control Investments—Other Reporting Issues jt jt jt
9 Foreign Currency Transactions jt jt
10 Translation and Consolidation of Foreign Operations jt jt jt jt jt
11 Accounting for Not-for-Profit Organization jt jt jt
Advanced Financial Accounting in Canada, 2Ce (Johnstone) Chapte jt jt jt jt jt jt jt
r 1 Introduction to Advanced Financial Accounting
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1.1 Describe the accounting standards used in Canada and how they apply to different rep jt jt jt jt jt jt jt jt jt jt jt jt jt
orting entities. jt
1) A private company in Canada that is closely held, has no debt, and wants to simplify the acc
jt jt jt jt jt jt jt jt jt jt jt jt jt jt jt jt jt
ounting process is most likely to report under which part of the CPA Canada Handbook?
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A) Part II — Accounting Standards for Private Enterprises (ASPE)
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B) Part IV — Accounting Standards for Pensions
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C) Part I — International Financial Reporting Standards (IFRS)
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D) Part III — Accounting Standards for Not-for-
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Profit Organizations Answer: A jt jt j t
Diff: 1 Type: MC jt j t jt
Taxonomy Category: Understanding jt j t
Learning Outcome: 1.1 Describe the accounting standards used in Canada and how they apply to differe
jt j t jt jt jt jt jt jt jt jt jt jt jt jt jt
nt reporting entities.
jt jt
2) In Canada, a private company has the choice to report under International Financial Reporting St
jt jt jt jt jt jt jt jt jt jt jt jt jt jt
andards (IFRS) or Accounting Standards for Private Enterprises (ASPE). Describe why the CPA Cana
jt jt jt jt jt jt jt jt jt jt jt jt jt
da Handbook provides the option for private enterprises.
jt jt jt jt jt jt jt
Answer: IFRS is meant to create consistency and comparability in international markets. One of the limi
j t jt jt jt jt jt jt jt jt jt jt jt jt jt jt
tations of IFRS is the complexity of reporting for equity investments that are meant to provide informati
jt jt jt jt jt jt jt jt jt jt jt jt jt jt jt jt
on to shareholders for decision-
jt jt jt jt
making purposes. Many private companies are held by a small group of shareholders who are often inv
jt jt jt jt jt jt jt jt jt jt jt jt jt jt jt jt
olved in the running of the business or have access to that information. As a result, the cost of applying m
jt jt jt jt jt jt jt jt jt jt jt jt jt jt jt jt jt jt jt jt
ore complex accounting policies outweighs the benefit of the information provided to this closely held g
jt jt jt jt jt jt jt jt jt jt jt jt jt jt jt
roup of shareholders. To address this, the Accounting Standards Board developed the Accounting Stand
jt jt jt jt jt jt jt jt jt jt jt jt jt
ards for Private Enterprises to meet the needs of private enterprises. Private enterprises have the option t
jt jt jt jt jt jt jt jt jt jt jt jt jt jt jt jt
o adopt IFRS or ASPE depending on the needs of the financial statement users.
jt jt jt jt jt jt jt jt jt jt jt jt jt
Diff: 2 Type: ES jt j t jt
Taxonomy Category: Understanding jt j t
Learning Outcome: 1.1 Describe the accounting standards used in Canada and how they apply to differe
jt j t jt jt jt jt jt jt jt jt jt jt jt jt jt
nt reporting entities.
jt jt
Copyright © 2026 Pearson Canada Inc.
, Open-Book Testing: Why It Makes Sense iii
3) What are the four parts of the CPA Canada Handbook —
jt jt jt jt jt jt jt jt jt jt
Accounting and which entities are they applicable to?
jt jt jt jt jt jt jt jt
Answer: The four parts are: j t jt jt jt
• Part I — International Financial Reporting Standards (IFRS) —
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applicable to publicly accountable, private, or not-for-profit entities.
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• Part II — Accounting Standards for Private Enterprises (ASPE) — applicable to private entities.
jt jt jt jt jt jt jt jt jt jt jt jt jt
• Part III — Accounting Standards for Not-for-Profit Organizations — applicable to not-for-
jt jt jt jt jt jt jt jt jt jt jt
profit entities. jt
• Part IV — Accounting Standards for Pension Plans —
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applicable to pension plans. Diff: 1 Type: ES
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Taxonomy Category: Remembering jt j t
Learning Outcome: 1.1 Describe the accounting standards used in Canada and how they apply to dif
jt j t jt jt jt jt jt jt jt jt jt jt jt jt jt
ferent reporting entities.
jt jt
4) In 2011, Canada adopted International Financial Reporting Standards (IFRS) for publicly ac
jt jt jt jt jt jt jt jt jt jt jt
countable enterprises. Explain the rationale for adopting IFRS in Canada.
jt jt jt jt jt jt jt jt jt
Answer: As the global economy expanded, the Accounting Standards Board (AcSB) chose to adopt IFRS
j t jt jt jt jt jt jt jt jt jt jt jt jt jt jt
in Canada to improve consistency and comparability in the international capital markets.
jt jt jt jt jt jt jt jt jt jt jt
Diff: 1 Type: ES
jt j t jt
Taxonomy Category: Understanding jt j t
Learning Outcome: 1.1 Describe the accounting standards used in Canada and how they apply to dif
jt j t jt jt jt jt jt jt jt jt jt jt jt jt jt
ferent reporting entities.
jt jt
1.2 Define, identify, and classify strategic and non- jt jt jt jt jt jt
strategic intercorporate investments made by reporting entities.
jt jt jt jt jt jt
1) Laliberte Products Ltd. (LPL), a public company, made several equity investments in the current ye
jt jt jt jt jt jt jt jt jt jt jt jt jt jt
ar. Which of the following investments would most likely be classified as an associate in LPL's financi
jt jt jt jt jt jt jt jt jt jt jt jt jt jt jt jt
al statements?
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A) 25,000 of the 30,000 outstanding voting common shares of Glabman Inc. There are significant int
jt jt jt jt jt jt jt jt jt jt jt jt jt jt
ercompany transactions between the two companies. jt jt jt jt jt
B) 13,500 of the 45,000 outstanding voting common shares of CCL Ltd. There are significant int
jt jt jt jt jt jt jt jt jt jt jt jt jt jt
ercompany transactions between the two companies. jt jt jt jt jt
C) 1,000 of the 20,000 outstanding voting common shares of Petruck Inc. There are no transactions bet
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ween the two corporations and LPL plans to hold these shares for less than a year.
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D) 3,000 of the 3,500 outstanding non- jt jt jt jt jt
voting preferred shares of Paradise Ltd. There is a small number of intercompany transactions be
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tween the two companies. jt jt jt
Answer: B j t
Diff: 2 Type: MC
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Taxonomy Category: Analyzing jt j t
Learning Outcome: 1.2 Define, identify, and classify strategic and non-
jt j t jt jt jt jt jt jt jt
strategic intercorporate investments made by reporting entities.
jt jt jt jt jt jt
2) Which of the following is NOT an indicator of significant influence?
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A) There are significant intercompany transactions between the investor and investee.
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B) The investor has the ability to shape the policies of the investee.
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C) The investor and investee are located in the same city and use the same legal firm.
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D) The ability to choose representation on the investee's board of directors or governing body.
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, iv
Answer: C j t
Diff: 1 Type: MC
jt j t jt
Taxonomy Category: Understanding
jt j t
Learning Outcome: 1.2 Define, identify, and classify strategic and non-
jt j t jt jt jt jt jt jt jt
strategic intercorporate investments made by reporting entities.
jt jt jt jt jt jt
Copyright © 2026 Pearson Canada Inc.
