Advanced Accounting in Canada, 1st Canadian Edition by Nathalie Johnstone and Kristie Dewald
TEST BANK for Advanced Accounting in
Canada, 1st Canadian Edition by
Nathalie Johnstone and Kristie
Dewald
Test Bank Page 1
, Advanced Accounting in Canada, 1st Canadian Edition by Nathalie Johnstone and Kristie Dewald
Chapter 1 Introduction to Advanced Financial Accounting
1.1 Describe the accounting standards used in Canada and how they apply to different
reporting entities.
1) A private company in Canada that is closely held, has no debt, and wants to simplify the
accounting process is most likely to report under which part of the CPA Canada Handbook?
A) Part II — Accounting Standards for Private Enterprises (ASPE)
B) Part IV — Accounting Standards for Pensions
C) Part I — International Financial Reporting Standards (IFRS)
D) Part III — Accounting Standards for Not-for-Profit
Organizations Answer: A
Diff: 1 Type: MC
Taxonomy Category: Understanding
Learning Outcome: 1.1 Describe the accounting standards used in Canada and how they apply
to different reporting entities.
2) In Canada, a private company has the choice to report under International Financial Reporting
Standards (IFRS) or Accounting Standards for Private Enterprises (ASPE). Describe why the CPA
Canada Handbook provides the option for private enterprises?
Answer: IFRS is meant to create consistency and comparability in international markets. One of
the limitations of IFRS is the complexity of reporting for equity investments that are meant to
provide information to shareholders for decision-making purposes. Many private companies are
held by a small group of shareholders who are often involved in the running of the business or
Test Bank Page 2
, Advanced Accounting in Canada, 1st Canadian Edition by Nathalie Johnstone and Kristie Dewald
have access to that information. As a result, the cost of applying more complex accounting policies
outweighs the benefit of the information provided to this closely held group of shareholders. To
address this, the Accounting Standards Board developed the Accounting Standards for Private
Enterprises to meet the needs of private enterprises. Private enterprises have the option to adopt
IFRS or ASPE depending on the needs of the financial statement users.
Diff: 2 Type: ES
Taxonomy Category: Understanding
Learning Outcome: 1.1 Describe the accounting standards used in Canada and how they apply
to different reporting entities.
3) What are the four parts of the CPA Canada Handbook — Accounting and which entities
are they applicable to?
Answer: The four parts are:
• Part I — International Financial Reporting Standards (IFRS) — applicable to publicly
accountable, private, or not-for-profit entities.
• Part II — Accounting Standards for Private Enterprises (ASPE) — applicable to private entities.
• Part III — Accounting Standards for Not-for-Profit Organizations — applicable to not-
for-profit entities.
• Part IV — Accounting Standards for Pension Plans — applicable to pension plans.
Diff: 1 Type: ES
Taxonomy Category: Remembering
Learning Outcome: 1.1 Describe the accounting standards used in Canada and how they apply
to different reporting entities.
Test Bank Page 3
, Advanced Accounting in Canada, 1st Canadian Edition by Nathalie Johnstone and Kristie Dewald
1.2 Discuss the conceptual framework for financial reporting and the general purpose of financial
reporting.
1) In 2011, Canada adopted International Financial Reporting Standards (IFRS) for publicly
accountable enterprises. Explain the rationale for adopting IFRS in Canada.
Answer: As the global economy expanded, the Accounting Standards Board (AcSB) chose to
adopt IFRS in Canada to improve consistency and comparability in the international capital
markets.
Diff: 1 Type: ES
Taxonomy Category: Understanding
Learning Outcome: 1.2 Discuss the conceptual framework for financial reporting and the
general purpose of financial reporting.
1.3 Define and identify strategic and non-strategic intercorporate investments made by reporting
entities.
1) Laliberte Products Ltd. (LPL), a public company, made several equity investments in the current
year. Which of the following investments would most likely be classified as an associate in LPL's
financial statements?
A) 25,000 of the 30,000 outstanding voting common shares of Glabman Inc. There are
significant intercompany transactions between the two companies.
B) 13,500 of the 45,000 outstanding voting common shares of CCL Ltd. There are significant
intercompany transactions between the two companies.
Test Bank Page 4
TEST BANK for Advanced Accounting in
Canada, 1st Canadian Edition by
Nathalie Johnstone and Kristie
Dewald
Test Bank Page 1
, Advanced Accounting in Canada, 1st Canadian Edition by Nathalie Johnstone and Kristie Dewald
Chapter 1 Introduction to Advanced Financial Accounting
1.1 Describe the accounting standards used in Canada and how they apply to different
reporting entities.
1) A private company in Canada that is closely held, has no debt, and wants to simplify the
accounting process is most likely to report under which part of the CPA Canada Handbook?
A) Part II — Accounting Standards for Private Enterprises (ASPE)
B) Part IV — Accounting Standards for Pensions
C) Part I — International Financial Reporting Standards (IFRS)
D) Part III — Accounting Standards for Not-for-Profit
Organizations Answer: A
Diff: 1 Type: MC
Taxonomy Category: Understanding
Learning Outcome: 1.1 Describe the accounting standards used in Canada and how they apply
to different reporting entities.
2) In Canada, a private company has the choice to report under International Financial Reporting
Standards (IFRS) or Accounting Standards for Private Enterprises (ASPE). Describe why the CPA
Canada Handbook provides the option for private enterprises?
Answer: IFRS is meant to create consistency and comparability in international markets. One of
the limitations of IFRS is the complexity of reporting for equity investments that are meant to
provide information to shareholders for decision-making purposes. Many private companies are
held by a small group of shareholders who are often involved in the running of the business or
Test Bank Page 2
, Advanced Accounting in Canada, 1st Canadian Edition by Nathalie Johnstone and Kristie Dewald
have access to that information. As a result, the cost of applying more complex accounting policies
outweighs the benefit of the information provided to this closely held group of shareholders. To
address this, the Accounting Standards Board developed the Accounting Standards for Private
Enterprises to meet the needs of private enterprises. Private enterprises have the option to adopt
IFRS or ASPE depending on the needs of the financial statement users.
Diff: 2 Type: ES
Taxonomy Category: Understanding
Learning Outcome: 1.1 Describe the accounting standards used in Canada and how they apply
to different reporting entities.
3) What are the four parts of the CPA Canada Handbook — Accounting and which entities
are they applicable to?
Answer: The four parts are:
• Part I — International Financial Reporting Standards (IFRS) — applicable to publicly
accountable, private, or not-for-profit entities.
• Part II — Accounting Standards for Private Enterprises (ASPE) — applicable to private entities.
• Part III — Accounting Standards for Not-for-Profit Organizations — applicable to not-
for-profit entities.
• Part IV — Accounting Standards for Pension Plans — applicable to pension plans.
Diff: 1 Type: ES
Taxonomy Category: Remembering
Learning Outcome: 1.1 Describe the accounting standards used in Canada and how they apply
to different reporting entities.
Test Bank Page 3
, Advanced Accounting in Canada, 1st Canadian Edition by Nathalie Johnstone and Kristie Dewald
1.2 Discuss the conceptual framework for financial reporting and the general purpose of financial
reporting.
1) In 2011, Canada adopted International Financial Reporting Standards (IFRS) for publicly
accountable enterprises. Explain the rationale for adopting IFRS in Canada.
Answer: As the global economy expanded, the Accounting Standards Board (AcSB) chose to
adopt IFRS in Canada to improve consistency and comparability in the international capital
markets.
Diff: 1 Type: ES
Taxonomy Category: Understanding
Learning Outcome: 1.2 Discuss the conceptual framework for financial reporting and the
general purpose of financial reporting.
1.3 Define and identify strategic and non-strategic intercorporate investments made by reporting
entities.
1) Laliberte Products Ltd. (LPL), a public company, made several equity investments in the current
year. Which of the following investments would most likely be classified as an associate in LPL's
financial statements?
A) 25,000 of the 30,000 outstanding voting common shares of Glabman Inc. There are
significant intercompany transactions between the two companies.
B) 13,500 of the 45,000 outstanding voting common shares of CCL Ltd. There are significant
intercompany transactions between the two companies.
Test Bank Page 4
