Complete Solution Manual For Modern Advanced
Accounting In Canada, 11th Edition By Darrell
Herauf
Copyright © 2019 McGraw-Hill Education. All rights reserved.
Solutions Manual, Chapter 6 1
,Complete Solution Manual For Modern Advanced
Accounting In Canada 11th 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)
Page 2 of 832
, 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.
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.
Copyright © 2019 McGraw-Hill Education. All rights reserved.
Solutions Manual, Chapter 6 3
, 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.
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
Page 4 of 832
Accounting In Canada, 11th Edition By Darrell
Herauf
Copyright © 2019 McGraw-Hill Education. All rights reserved.
Solutions Manual, Chapter 6 1
,Complete Solution Manual For Modern Advanced
Accounting In Canada 11th 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)
Page 2 of 832
, 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.
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.
Copyright © 2019 McGraw-Hill Education. All rights reserved.
Solutions Manual, Chapter 6 3
, 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.
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
Page 4 of 832
