COMPLETE SOLUTION MANUAL FOR MODERN ADVANCED ACCOUNTING IN
CANADA 9TH EDITION HILTON MURRAY,HERAUF DARRELL
Chapter 1
Conceptual & Case Analysis
Frameworks For Financial Reporting
A Brief Description Of The Major Points Covered In Each Case And
Problem. CASES
Case 1-1
In This Case, Students Are Introduced To The Difference In Accounting For R&D Costs
Between IFRS And ASPE And Asked To Provide Arguments To Support The Different
Standards.
Case 1-2 (Adapted From A Case Prepared By Peter Secord, Saint Mary’s University)
In This Real Life Case, Students Are Asked To Discuss The Merits Of Historical Costs Vs.
Replacement Costs. Actual Note Disclosure From A Company’s Financial Statements Is
Provided As Background Material.
Case 1-3 (Adapted From A Case Prepared By Peter Secord, Saint Mary’s University)
Copyright 2019 McGraw-Hill Education. All rights reserved.
Solutions Manual, Chapter 6 1
,A Canadian Company Has Just Acquired A Non-Controlling Interest In A U.S. Public Company.
It Must Decide Whether To Use IFRS Or U.S. GAAP For The U.S. Subsidiary. Financial
Statement Information Is Provided Under IFRS And U.S. GAAP. The Reasons For Some Of
The Differences In Numbers Must Be Explained And An Opinion Provided As To Which Method
Best Reflects Economic Reality.
Case 1-4
This Case Is Adapted From A CPA Canada Case. A Private Company Is Planning To Go
Public. Analysis And Recommendations Are Required For Accounting Issues Related To
Purchase And Installation Of New Information System, Revenue Recognition, Convertible
Debentures And Doubtful Accounts Receivable.
Case 1-5
This Case Is Adapted From A CPA Canada Case. A Private Company Is Planning To
Transition From ASPE To IFRS. Analysis And Recommendations Are Required For Accounting
Issues Related To Convertible Debentures, Unusual Item, Revenue Recognition, Contingency
And Impairment.
Copyright 2019 McGraw-Hill Education. All rights reserved.
2 Modern Advanced Accounting in Canada, Ninth Edition
,PROBLEMS
Problem 1-1 (40 Min.)
A Single Asset Is Acquired. Students Are Asked To Prepare And Compare Financial Statement
Numbers During The Life Of The Asset Using Both A Historical Cost And A Current Value
Model.
Problem 1-2 (40 Min.)
Details Of A European Company That Reports Using IFRS Are Given Along With Specific
Details Relating To Certain Account Balances. Students Are Asked To Show How These
Balances Should Be Reported Under 1) ASPE And 2) IFRS Using The Facts Provided.
Students Are Also Asked To Reconcile Net Income And Shareholders` Equity From IFRS To
ASPE.
Problem 1-3 (50 Min.)
A Private Company Plans To Convert To IFRS Go Public Within 5 Years. It Wants To Know
The Impact On Net Income And Shareholders’ Equity If It Converts From ASPE To IFRS For
Impaired Loans, Interest Costs, Actuarial Gains, Compound Financial Instrument And Income
Taxes.
Problem 1-4 (50 Min.)
While Taking The Role Of A Financial Analyst, The Student Uses Vertical And Horizontal
Analysis And Ratios To Analyse And Interpret The Profitability, Solvency And Liquidity Of A
Private Company.
Problem 1-5 (25 Min.)
A Private Company Plans To Convert To IFRS. It Wants To Know The Impact On Three Key
Ratios If It Converts From ASPE To IFRS For Impaired Loans, Capitalization Of Interest And
Actuarial Gains/Losses.
Problem 1-6 (50 Min.)
A Private Company Plans To Convert From ASPE To IFRS And Wants To Know The Impact On
Three Key Ratios If It Converts From ASPE To IFRS For Impairment Losses, Convertible Bonds
And Income Taxes.
Copyright 2019 McGraw-Hill Education. All rights reserved.
Solutions Manual, Chapter 6 3
, SOLUTIONS TO REVIEW QUESTIONS
1. There Are Times When External Users May Want Financial Reports That Do Not Follow
GAAP. For Example, Users May Need Financial Statements Using Non-GAAP Accounting
Policies Required For Legislative Or Regulatory Purposes, Or For Contract Compliance. A
Prospective Lender May Want To Receive A Balance Sheet With Assets Reported At Fair
Value Rather Than Historical Cost. Accountants Have The Skills And Abilities To Provide
Financial Information In A Variety Of Formats Or Using A Variety Of Accounting Policies.
When The Financial Statements Use Non-GAAP Accounting Policies, The Accounting
Policies Must Be Disclosed In The Notes To The Financial Statements. The Accountant’s
Report Would Make Reference To These Accounting Policies.
2. The Three Main Areas Where Judgment Needs To Be Applied Are As Follows:
- Choosing Accounting Policies That Are Appropriate For The Company’s Situation
- Making Estimates To Accurately Reflect The Company’s Financial Position And
Results Of Operations
- Deciding What To Disclose And How To Disclose It In The Notes To The Financial Statements.
3. The GAAP-Based Financial Statements Are Prepared Primarily For The Benefit Of External
Users. The Financial Statements Provide A Summary Of The Financial Position And Results
Of Operations For The Company. Management Has Access To The Detailed Information
Available Within The Company. Therefore, The Formal Financial Statements Should Give
Priority To The Needs Of The External Users.
4. The Main Reason The Accounting Standards Board Decided To Create A Separate Section
Of The CPA Canada Handbook For Private Enterprises Was To Address The Cost/Benefit
Discrepancy With Respect To Smaller Private Companies’ Ability To Comply With GAAP.
GAAP Has Become Increasingly Complex And For Smaller Private Enterprises This Often
Means That The Cost Of Complying With Such Requirements Outweighs The Benefit
Received From Compliance. In 2002, The Acsb Adopted Differential Reporting, Which
Allowed Private Enterprises Choices With The Respect To Certain Complex Accounting
Standards (E.G. The Option To Use The Cost Method For Investments That Would
Otherwise Require The Equity Method). In 2009, The Acsb Decided To Create A Self-
Contained Set Of Standards For Private Enterprises. These Standards Were Effective For
Fiscal Periods Beginning On Or After January 1, 2011.
5. There Are A Few Reasons Why A Private Company Would Want To Comply With IFRS Even
Though It Is Not Required To Do So. It May Have Plans To Become Publicly Listed At Some Point
Copyright 2019 McGraw-Hill Education. All rights reserved.
4 Modern Advanced Accounting in Canada, Ninth Edition
CANADA 9TH EDITION HILTON MURRAY,HERAUF DARRELL
Chapter 1
Conceptual & Case Analysis
Frameworks For Financial Reporting
A Brief Description Of The Major Points Covered In Each Case And
Problem. CASES
Case 1-1
In This Case, Students Are Introduced To The Difference In Accounting For R&D Costs
Between IFRS And ASPE And Asked To Provide Arguments To Support The Different
Standards.
Case 1-2 (Adapted From A Case Prepared By Peter Secord, Saint Mary’s University)
In This Real Life Case, Students Are Asked To Discuss The Merits Of Historical Costs Vs.
Replacement Costs. Actual Note Disclosure From A Company’s Financial Statements Is
Provided As Background Material.
Case 1-3 (Adapted From A Case Prepared By Peter Secord, Saint Mary’s University)
Copyright 2019 McGraw-Hill Education. All rights reserved.
Solutions Manual, Chapter 6 1
,A Canadian Company Has Just Acquired A Non-Controlling Interest In A U.S. Public Company.
It Must Decide Whether To Use IFRS Or U.S. GAAP For The U.S. Subsidiary. Financial
Statement Information Is Provided Under IFRS And U.S. GAAP. The Reasons For Some Of
The Differences In Numbers Must Be Explained And An Opinion Provided As To Which Method
Best Reflects Economic Reality.
Case 1-4
This Case Is Adapted From A CPA Canada Case. A Private Company Is Planning To Go
Public. Analysis And Recommendations Are Required For Accounting Issues Related To
Purchase And Installation Of New Information System, Revenue Recognition, Convertible
Debentures And Doubtful Accounts Receivable.
Case 1-5
This Case Is Adapted From A CPA Canada Case. A Private Company Is Planning To
Transition From ASPE To IFRS. Analysis And Recommendations Are Required For Accounting
Issues Related To Convertible Debentures, Unusual Item, Revenue Recognition, Contingency
And Impairment.
Copyright 2019 McGraw-Hill Education. All rights reserved.
2 Modern Advanced Accounting in Canada, Ninth Edition
,PROBLEMS
Problem 1-1 (40 Min.)
A Single Asset Is Acquired. Students Are Asked To Prepare And Compare Financial Statement
Numbers During The Life Of The Asset Using Both A Historical Cost And A Current Value
Model.
Problem 1-2 (40 Min.)
Details Of A European Company That Reports Using IFRS Are Given Along With Specific
Details Relating To Certain Account Balances. Students Are Asked To Show How These
Balances Should Be Reported Under 1) ASPE And 2) IFRS Using The Facts Provided.
Students Are Also Asked To Reconcile Net Income And Shareholders` Equity From IFRS To
ASPE.
Problem 1-3 (50 Min.)
A Private Company Plans To Convert To IFRS Go Public Within 5 Years. It Wants To Know
The Impact On Net Income And Shareholders’ Equity If It Converts From ASPE To IFRS For
Impaired Loans, Interest Costs, Actuarial Gains, Compound Financial Instrument And Income
Taxes.
Problem 1-4 (50 Min.)
While Taking The Role Of A Financial Analyst, The Student Uses Vertical And Horizontal
Analysis And Ratios To Analyse And Interpret The Profitability, Solvency And Liquidity Of A
Private Company.
Problem 1-5 (25 Min.)
A Private Company Plans To Convert To IFRS. It Wants To Know The Impact On Three Key
Ratios If It Converts From ASPE To IFRS For Impaired Loans, Capitalization Of Interest And
Actuarial Gains/Losses.
Problem 1-6 (50 Min.)
A Private Company Plans To Convert From ASPE To IFRS And Wants To Know The Impact On
Three Key Ratios If It Converts From ASPE To IFRS For Impairment Losses, Convertible Bonds
And Income Taxes.
Copyright 2019 McGraw-Hill Education. All rights reserved.
Solutions Manual, Chapter 6 3
, SOLUTIONS TO REVIEW QUESTIONS
1. There Are Times When External Users May Want Financial Reports That Do Not Follow
GAAP. For Example, Users May Need Financial Statements Using Non-GAAP Accounting
Policies Required For Legislative Or Regulatory Purposes, Or For Contract Compliance. A
Prospective Lender May Want To Receive A Balance Sheet With Assets Reported At Fair
Value Rather Than Historical Cost. Accountants Have The Skills And Abilities To Provide
Financial Information In A Variety Of Formats Or Using A Variety Of Accounting Policies.
When The Financial Statements Use Non-GAAP Accounting Policies, The Accounting
Policies Must Be Disclosed In The Notes To The Financial Statements. The Accountant’s
Report Would Make Reference To These Accounting Policies.
2. The Three Main Areas Where Judgment Needs To Be Applied Are As Follows:
- Choosing Accounting Policies That Are Appropriate For The Company’s Situation
- Making Estimates To Accurately Reflect The Company’s Financial Position And
Results Of Operations
- Deciding What To Disclose And How To Disclose It In The Notes To The Financial Statements.
3. The GAAP-Based Financial Statements Are Prepared Primarily For The Benefit Of External
Users. The Financial Statements Provide A Summary Of The Financial Position And Results
Of Operations For The Company. Management Has Access To The Detailed Information
Available Within The Company. Therefore, The Formal Financial Statements Should Give
Priority To The Needs Of The External Users.
4. The Main Reason The Accounting Standards Board Decided To Create A Separate Section
Of The CPA Canada Handbook For Private Enterprises Was To Address The Cost/Benefit
Discrepancy With Respect To Smaller Private Companies’ Ability To Comply With GAAP.
GAAP Has Become Increasingly Complex And For Smaller Private Enterprises This Often
Means That The Cost Of Complying With Such Requirements Outweighs The Benefit
Received From Compliance. In 2002, The Acsb Adopted Differential Reporting, Which
Allowed Private Enterprises Choices With The Respect To Certain Complex Accounting
Standards (E.G. The Option To Use The Cost Method For Investments That Would
Otherwise Require The Equity Method). In 2009, The Acsb Decided To Create A Self-
Contained Set Of Standards For Private Enterprises. These Standards Were Effective For
Fiscal Periods Beginning On Or After January 1, 2011.
5. There Are A Few Reasons Why A Private Company Would Want To Comply With IFRS Even
Though It Is Not Required To Do So. It May Have Plans To Become Publicly Listed At Some Point
Copyright 2019 McGraw-Hill Education. All rights reserved.
4 Modern Advanced Accounting in Canada, Ninth Edition
