Solution Manual for Intermediate Accounting, Volume
1, 11th Canadian Edition, Donald E. Kieso, Jerry J.
Weygandt, Terry D. Warfield, Nicola M. Young, Irene
M. Wiecek, Bruce J. McConomy, ISBN:
9781119048534
, CHAPTER 1
THE CANADIAN FINANCIAL REPORTING
ENVIRONMENT
ASSIGNMENT CLASSIFICATION TABLE
Topic Brief Exercises Cases
1. Financial statements and financial reporting. 7
2. Capital allocation. 1
3. Stakeholders. 2 3, 4, 5
4. Objectives of financial reporting. 3, 15, 23
5. Management bias in financial reporting. 1, 2, 4, 5
6. Importance of user needs in financial reporting. 7, 15
7. Need for accounting standards. 6, 7, 8
8. Parties involved in standard-setting. 8, 9, 10, 11, 12,
13, 14, 15
9. GAAP. 16, 17, 18, 19
10. Professional judgement. 20, 21
11. Ethical issues. 22, 24 1, 2, 5
12. Challenges facing financial accounting 21, 25, 26
13. Information asymmetry 4, 5
,SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 1-1
Accounting has the responsibility of measuring company
performance accurately and fairly on a timely basis. This enables
investors and creditors to assess the relative risks and returns
of investment opportunities and channel resources more
effectively. If a company’s financial performance is measured
accurately, fairly, and on a timely basis, the right managers and
companies are able to attract investment capital. Unreliable and
irrelevant information leads to poor capital allocation, which
adversely affects the securities market and ultimately the
performance of the economy as a whole.
BRIEF EXERCISE 1-2
Some stakeholders using financial accounting information and
financial statements include:
Investors – These stakeholders are interested in the performance
of their investment in the company. They will use the financial
statements to evaluate management stewardship and
effectiveness.
Creditors – These stakeholders are interested in evaluating the
company to decide whether to lend it money. They use the
statements to evaluate the risk that will be taken in making the
loan. For example, lenders want to know whether the company
will be able to repay its loans when due and service both interest
and principal on a timely basis.
, BRIEF EXERCISE 1-2 (CONTINUED)
Canada Revenue Agency (CRA) – This stakeholder establishes
the rules for measuring taxable income. It is interested in the fair
measurement of the financial position and financial performance
of the company so that the appropriate amount of tax will be paid.
The financial statement’s net income is the starting point in
preparing tax returns. Net income for accounting purposes is
adjusted to arrive at net income for tax purposes, which is used
to calculate the amount of tax payable. The CRA is principally
interested in compliance with the Income Tax Act.
Financial Analysts – These stakeholders provide investment
advice to their clients. They are interested in evaluating the
investment opportunities and potential of various companies.
Note: This is only a suggested list of stakeholders and their
possible uses of the financial accounting information. There are
many other stakeholders as discussed in the chapter that would
be acceptable answers to this question.
Different stakeholders make different decisions that require
different information. For example, lenders want to know whether
the company will be able to repay its loans but the Canada
Revenue Agency (CRA) wants to know the amount of taxes that
should be paid for the current year. Much of the information that
the lenders would request, such as who are the company’s major
customers and the amounts they owe the company, would be of
no interest to the CRA for income tax purposes yet may be of
relevance in a GST/HST review.
1, 11th Canadian Edition, Donald E. Kieso, Jerry J.
Weygandt, Terry D. Warfield, Nicola M. Young, Irene
M. Wiecek, Bruce J. McConomy, ISBN:
9781119048534
, CHAPTER 1
THE CANADIAN FINANCIAL REPORTING
ENVIRONMENT
ASSIGNMENT CLASSIFICATION TABLE
Topic Brief Exercises Cases
1. Financial statements and financial reporting. 7
2. Capital allocation. 1
3. Stakeholders. 2 3, 4, 5
4. Objectives of financial reporting. 3, 15, 23
5. Management bias in financial reporting. 1, 2, 4, 5
6. Importance of user needs in financial reporting. 7, 15
7. Need for accounting standards. 6, 7, 8
8. Parties involved in standard-setting. 8, 9, 10, 11, 12,
13, 14, 15
9. GAAP. 16, 17, 18, 19
10. Professional judgement. 20, 21
11. Ethical issues. 22, 24 1, 2, 5
12. Challenges facing financial accounting 21, 25, 26
13. Information asymmetry 4, 5
,SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 1-1
Accounting has the responsibility of measuring company
performance accurately and fairly on a timely basis. This enables
investors and creditors to assess the relative risks and returns
of investment opportunities and channel resources more
effectively. If a company’s financial performance is measured
accurately, fairly, and on a timely basis, the right managers and
companies are able to attract investment capital. Unreliable and
irrelevant information leads to poor capital allocation, which
adversely affects the securities market and ultimately the
performance of the economy as a whole.
BRIEF EXERCISE 1-2
Some stakeholders using financial accounting information and
financial statements include:
Investors – These stakeholders are interested in the performance
of their investment in the company. They will use the financial
statements to evaluate management stewardship and
effectiveness.
Creditors – These stakeholders are interested in evaluating the
company to decide whether to lend it money. They use the
statements to evaluate the risk that will be taken in making the
loan. For example, lenders want to know whether the company
will be able to repay its loans when due and service both interest
and principal on a timely basis.
, BRIEF EXERCISE 1-2 (CONTINUED)
Canada Revenue Agency (CRA) – This stakeholder establishes
the rules for measuring taxable income. It is interested in the fair
measurement of the financial position and financial performance
of the company so that the appropriate amount of tax will be paid.
The financial statement’s net income is the starting point in
preparing tax returns. Net income for accounting purposes is
adjusted to arrive at net income for tax purposes, which is used
to calculate the amount of tax payable. The CRA is principally
interested in compliance with the Income Tax Act.
Financial Analysts – These stakeholders provide investment
advice to their clients. They are interested in evaluating the
investment opportunities and potential of various companies.
Note: This is only a suggested list of stakeholders and their
possible uses of the financial accounting information. There are
many other stakeholders as discussed in the chapter that would
be acceptable answers to this question.
Different stakeholders make different decisions that require
different information. For example, lenders want to know whether
the company will be able to repay its loans but the Canada
Revenue Agency (CRA) wants to know the amount of taxes that
should be paid for the current year. Much of the information that
the lenders would request, such as who are the company’s major
customers and the amounts they owe the company, would be of
no interest to the CRA for income tax purposes yet may be of
relevance in a GST/HST review.
