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
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,group of shareholders who are often involved in the running of the business or 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.
1.2 Discuss the conceptual framework for financial reporting and the general purpose of financial
reporting.
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, 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.
C) 1,000 of the 20,000 outstanding voting common shares of Petruck Inc. There are no transactions
between the two corporations and LPL plans to hold these shares for less than a year.
D) 3,000 of the 3,500 outstanding non-voting preferred shares of Paradise Ltd. There is a small number of
intercompany transactions between the two companies.
Answer: B
Diff: 2 Type: MC
Taxonomy Category: Analyzing
Learning Outcome: 1.3 Define and identify strategic and non-strategic intercorporate investments made by
Test Bank Page 4
, 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
Test Bank Page 2
,group of shareholders who are often involved in the running of the business or 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.
1.2 Discuss the conceptual framework for financial reporting and the general purpose of financial
reporting.
Test Bank Page 3
, 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.
C) 1,000 of the 20,000 outstanding voting common shares of Petruck Inc. There are no transactions
between the two corporations and LPL plans to hold these shares for less than a year.
D) 3,000 of the 3,500 outstanding non-voting preferred shares of Paradise Ltd. There is a small number of
intercompany transactions between the two companies.
Answer: B
Diff: 2 Type: MC
Taxonomy Category: Analyzing
Learning Outcome: 1.3 Define and identify strategic and non-strategic intercorporate investments made by
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