CPA CFE Summary Notes – Core & Elective Topics (ASPE, IFRS, Audit, Taxation, and Finance) – Canada – 2024 Exam Prep Guide

CPA CFE
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1. Accounts receivable

Financial Reporting (ASPE)

Core - Level A: Accounts receivable (ASPE)
· Considered a financial instrument (financial asset), as it represents a contractual
right to receive cash or another financial asset from another party

· As such, accounts receivable must be tested for impairment at the end of the
reporting period if significant adverse changes during the period cast doubt on
collectability

· If impaired, then should be written down to the amount expected to be collected
through the use of an allowance account

· The amount of the reduction shall be recognized as a bad debt expense in net
income.

Reference: ASPE 3856.05(h), .16, .17
2. Inventory valuation

Financial Reporting (ASPE)

Core - Level A: Inventory valuation (ASPE)
· Inventories shall be measured at the lower of cost and net realizable value (NRV).

· The cost of inventories shall comprise all costs of purchase, costs of conversion,
and other costs incurred in bringing the inventories to their present location and
condition.

· NRV is the estimated selling price in the ordinary course of business less estimated
selling costs

· Estimates of NRV are based on the most reliable evidence available, at the time
the estimates are made, of the amount the inventories are expected to realize upon
sale.

Reference: ASPE 3031.07, .10-12, .29



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3. Inventory costs

Financial Reporting (ASPE)

Core - Level A: Inventory costs (ASPE)
· The cost of inventories shall comprise all purchase, conversion and other costs
incurred in bringing the inventories to their present location and condition

· Trade discounts, rebates and other similar items are deducted in determining the
costs of purchase

· Storage, administrative overhead, and selling costs are specifically excluded from
the cost of inventories

Reference: ASPE 3031.11, .12, .17
4. Internally generated intangible assets - R&D

Financial Reporting (ASPE)

Core - Level A: Internally generated intangible assets - R&D (ASPE)
· Research costs are always expensed when incurred

· Accounting policy choice to either capitalize or expense development costs

· Development costs can be capitalized if all of the following exist:
o Technically feasible
o Intention to complete it
o Ability to use or sell it
o Availability of adequate technical, financial and other resources to complete the
development
o Ability to reliably measure the expenditures attributed
o Probable future economic benefits will be generated

Case: TankCo
Reference: ASPE 3064.37, .40, .41
5. Goodwill and intangible assets - Amortization

Financial Reporting (ASPE)



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Core - Level A: Goodwill and intangible assets - Amortization (ASPE)
· Intangibles are to be amortized over their estimated useful lives unless they are
considered to have an indefinite life

· Assets with indefinite lives are not to be amortized until the life is no longer
considered indefinite (however it must still be tested for impairment)

· Amortization method and useful life should be reviewed annually

· The expected useful life must consider:
o expected use of the asset,
o expected useful life of related assets,
o contractual, legal and regulatory provisions and other economic factors

Reference: ASPE 3064.56, .57, .61
6. Investments

Financial Reporting (ASPE)

Core - Level A: Investments (ASPE)
· Investments subject to significant influence can be accounted for using the equity
or cost method

· Investments without significant influence:
o Not quoted on an active market - accounted for using cost method
o Quoted on active market - accounted for at fair value

Reference: ASPE 3051 and 3856.11 - .15
7. Financial instruments - Impairment

Financial Reporting (ASPE)

Core - Level A: Financial instruments - Impairment (ASPE)
· Financial instruments tested for impairment at the end of each reporting period.
Where impairment exists, reduce the carrying value to the highest of:
o Present value (PV) of cash flows expected from holding the asset
o Net realizable value (if asset sold)
o Amount entity expects to realize from exercising its right to collateral



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· Impairment can be reversed if asset subsequently recovers in value

Reference: ASPE 3856.16 - .19
8. Deductibility of expenses

Taxation

Core - Level B: Deductibility of expenses (Tax)
· General limitation - To be deductible, expense or outlay must be made or incurred
by the taxpayer for the purpose of gaining, producing or maintaining income, and be
expected to generate income related to the taxpayer's business or property

Case: Dogani, Roxanne Kalpert, Solar Panel Solutions, Elcar
Reference: ITA 18(1)(a)
9. Common business expenses DISALLOWED

Taxation

Core - Level B: Common business expenses DISALLOWED (Tax)
· Amortization / Impairment / Accounting Gains & Losses (deduct via CCA)

· Personal expenses and membership / club dues

· Charitable donations - deduction to determine Taxable Income for a Corp.

· Political contributions - limited tax credit available for an individual; Federal Ac-
countability Act deems corporate political contributions to be illegal, resulting in no
deduction or credit.

· Taxes, interest and penalties related to tax

· Meals & entertainment (50% for business purposes, deductible for remote or
temporary work sites, or special events for employees)

· Expenses re: issue or sale of shares and refinancing costs (deduct over 5 years)

· Life insurance premiums (except where the policy has been assigned as collateral)

· Unpaid amounts & unpaid remuneration (accrued salary which is unpaid 180 days