4.99 See Answer

Question: Lauder Adventures Limited (LAL) was incorporated

Lauder Adventures Limited (LAL) was incorporated over 40 years ago as an amusement park and golf course. Over time, a nearby city has grown to the point where it borders on LAL's properties. In recent years LAL's owners, who are all members of one family, have seen LAL's land values increase significantly. LAL's majority shareholder, Hassan Poosti, owns 55% of the outstanding shares and is not active in LAL's day-to-day activities. Last year, Hassan hired a new chief executive officer, Leo Titan. Leo has a reputation for being an aggressive risk taker. Hassan is committed, and has the personal financial resources required, to support Leo's plans. Eight months ago, LAL became the successful bidder for a new sports franchise, in conjunction with a minority partner. Under the terms of the franchise agreement, LAL is required to build a sports arena, which is currently being constructed. The arena is being built on a section of the amusement park. Another section of the amusement park is being relocated to ensure that the entrances to the arena are close to public transportation and parking. Consequently, some of the rides will be relocated. LAL is the sole owner of the arena at present. The sports franchise is separately incorporated as Northern Sports Limited (NSL); LAL holds 75% of the shares in the company. Another bid is being prepared by NSL to obtain a second sports franchise so that the arena can be used more often. NSL will be required to lease space from LAL when the arena is completed, in about 22 months. For the first two sports seasons, NSL will have to lease arena space from Aggressive Limited (AL). During this time, NSL does not expect to be profitable because • it may take time to build a competitive team; • AL is charging a high rent, and it is not giving NSL a share of concession (hot dogs, drinks) revenue; • AL cannot make the better dates (e.g., Saturday night) available to NSL to attract sports fans; and • as a newcomer to the league, NSL is restricted with regard to the players who are available to it and the days of the week it can play in its home city. Consequently, NSL has arranged to borrow funds from LAL and from others to finance costs and losses. Your employer, Fabio & Fox, Chartered Professional Accountants, has conducted the audit of LAL for several years. LAL has tended to be marginally profitable one year and then have losses the next year. The company has continued to operate because the directors know that the real estate holdings were becoming increasingly valuable. Leo is expected to oversee the expanded accounting and finance functions in the company. He has met with you and the partner in charge of the LAL audit and discussed various issues related to the year ending September 30, Year 8. His comments are provided in Exhibit I. It is September 5, Year 8. You have been asked by the partner to prepare a report for him, which will be used for the next meeting with Leo. He would like you to discuss the accounting issues related to your discussion with Leo. The partner wants a thorough analysis of all important issues as well as support for your position. LAL has been and wishes to continue using IFRS. In your review of documents, and as a result of various conversations, you have learned the following: 1. The arena will be mortgaged, but only for about 50% of its expected cost. Lenders are concerned about the special-use nature of the arena and whether it will be successfully rented for other events such as concerts. 2. The mortgage lenders to LAL and the non-controlling shareholders in NSL are both expected to want to see appraisals and financial statements before deciding whether to invest. Covenants will be required by the lenders to ensure that excessive expenditures are not undertaken and that cash is preserved. 3. Leo does not intend to consolidate NSL until it is profitable. The investment in NSL will be reported on LAL's financial statements at cost. Thus, LAL's financial statements will also be used for income tax purposes. 4. LAL's non-controlling shareholders are not active in the business and want quarterly financial statements in order to monitor progress and assess Leo's performance. The non-controlling shareholders have all expressed concern over Leo's growth strategy over the past year. Most are relying on LAL to supplement their income. Exhibit I:
Lauder Adventures Limited (LAL) was incorporated over 40 years ago as an amusement park and golf course. Over time, a nearby city has grown to the point where it borders on LAL's properties. In recent years LAL's owners, who are all members of one family, have seen LAL's land values increase significantly. LAL's majority shareholder, Hassan Poosti, owns 55% of the outstanding shares and is not active in LAL's day-to-day activities.
Last year, Hassan hired a new chief executive officer, Leo Titan. Leo has a reputation for being an aggressive risk taker. Hassan is committed, and has the personal financial resources required, to support Leo's plans.
Eight months ago, LAL became the successful bidder for a new sports franchise, in conjunction with a minority partner. Under the terms of the franchise agreement, LAL is required to build a sports arena, which is currently being constructed. The arena is being built on a section of the amusement park. Another section of the amusement park is being relocated to ensure that the entrances to the arena are close to public transportation and parking. Consequently, some of the rides will be relocated. LAL is the sole owner of the arena at present.
The sports franchise is separately incorporated as Northern Sports Limited (NSL); LAL holds 75% of the shares in the company. Another bid is being prepared by NSL to obtain a second sports franchise so that the arena can be used more often. NSL will be required to lease space from LAL when the arena is completed, in about 22 months.
For the first two sports seasons, NSL will have to lease arena space from Aggressive Limited (AL). During this time, NSL does not expect to be profitable because 
• it may take time to build a competitive team; 
• AL is charging a high rent, and it is not giving NSL a share of concession (hot dogs, drinks) revenue; 
• AL cannot make the better dates (e.g., Saturday night) available to NSL to attract sports fans; and 
• as a newcomer to the league, NSL is restricted with regard to the players who are available to it and the days of the week it can play in its home city. 
Consequently, NSL has arranged to borrow funds from LAL and from others to finance costs and losses.
Your employer, Fabio & Fox, Chartered Professional Accountants, has conducted the audit of LAL for several years. LAL has tended to be marginally profitable one year and then have losses the next year. The company has continued to operate because the directors know that the real estate holdings were becoming increasingly valuable.
Leo is expected to oversee the expanded accounting and finance functions in the company. He has met with you and the partner in charge of the LAL audit and discussed various issues related to the year ending September 30, Year 8. His comments are provided in Exhibit I.
It is September 5, Year 8. You have been asked by the partner to prepare a report for him, which will be used for the next meeting with Leo. He would like you to discuss the accounting issues related to your discussion with Leo. The partner wants a thorough analysis of all important issues as well as support for your position. LAL has been and wishes to continue using IFRS.
In your review of documents, and as a result of various conversations, you have learned the following: 
1. The arena will be mortgaged, but only for about 50% of its expected cost. Lenders are concerned about the special-use nature of the arena and whether it will be successfully rented for other events such as concerts. 
2. The mortgage lenders to LAL and the non-controlling shareholders in NSL are both expected to want to see appraisals and financial statements before deciding whether to invest. Covenants will be required by the lenders to ensure that excessive expenditures are not undertaken and that cash is preserved. 
3. Leo does not intend to consolidate NSL until it is profitable. The investment in NSL will be reported on LAL's financial statements at cost. Thus, LAL's financial statements will also be used for income tax purposes. 
4. LAL's non-controlling shareholders are not active in the business and want quarterly financial statements in order to monitor progress and assess Leo's performance. The non-controlling shareholders have all expressed concern over Leo's growth strategy over the past year. Most are relying on LAL to supplement their income.

Exhibit I:


Lauder Adventures Limited (LAL) was incorporated over 40 years ago as an amusement park and golf course. Over time, a nearby city has grown to the point where it borders on LAL's properties. In recent years LAL's owners, who are all members of one family, have seen LAL's land values increase significantly. LAL's majority shareholder, Hassan Poosti, owns 55% of the outstanding shares and is not active in LAL's day-to-day activities.
Last year, Hassan hired a new chief executive officer, Leo Titan. Leo has a reputation for being an aggressive risk taker. Hassan is committed, and has the personal financial resources required, to support Leo's plans.
Eight months ago, LAL became the successful bidder for a new sports franchise, in conjunction with a minority partner. Under the terms of the franchise agreement, LAL is required to build a sports arena, which is currently being constructed. The arena is being built on a section of the amusement park. Another section of the amusement park is being relocated to ensure that the entrances to the arena are close to public transportation and parking. Consequently, some of the rides will be relocated. LAL is the sole owner of the arena at present.
The sports franchise is separately incorporated as Northern Sports Limited (NSL); LAL holds 75% of the shares in the company. Another bid is being prepared by NSL to obtain a second sports franchise so that the arena can be used more often. NSL will be required to lease space from LAL when the arena is completed, in about 22 months.
For the first two sports seasons, NSL will have to lease arena space from Aggressive Limited (AL). During this time, NSL does not expect to be profitable because 
• it may take time to build a competitive team; 
• AL is charging a high rent, and it is not giving NSL a share of concession (hot dogs, drinks) revenue; 
• AL cannot make the better dates (e.g., Saturday night) available to NSL to attract sports fans; and 
• as a newcomer to the league, NSL is restricted with regard to the players who are available to it and the days of the week it can play in its home city. 
Consequently, NSL has arranged to borrow funds from LAL and from others to finance costs and losses.
Your employer, Fabio & Fox, Chartered Professional Accountants, has conducted the audit of LAL for several years. LAL has tended to be marginally profitable one year and then have losses the next year. The company has continued to operate because the directors know that the real estate holdings were becoming increasingly valuable.
Leo is expected to oversee the expanded accounting and finance functions in the company. He has met with you and the partner in charge of the LAL audit and discussed various issues related to the year ending September 30, Year 8. His comments are provided in Exhibit I.
It is September 5, Year 8. You have been asked by the partner to prepare a report for him, which will be used for the next meeting with Leo. He would like you to discuss the accounting issues related to your discussion with Leo. The partner wants a thorough analysis of all important issues as well as support for your position. LAL has been and wishes to continue using IFRS.
In your review of documents, and as a result of various conversations, you have learned the following: 
1. The arena will be mortgaged, but only for about 50% of its expected cost. Lenders are concerned about the special-use nature of the arena and whether it will be successfully rented for other events such as concerts. 
2. The mortgage lenders to LAL and the non-controlling shareholders in NSL are both expected to want to see appraisals and financial statements before deciding whether to invest. Covenants will be required by the lenders to ensure that excessive expenditures are not undertaken and that cash is preserved. 
3. Leo does not intend to consolidate NSL until it is profitable. The investment in NSL will be reported on LAL's financial statements at cost. Thus, LAL's financial statements will also be used for income tax purposes. 
4. LAL's non-controlling shareholders are not active in the business and want quarterly financial statements in order to monitor progress and assess Leo's performance. The non-controlling shareholders have all expressed concern over Leo's growth strategy over the past year. Most are relying on LAL to supplement their income.

Exhibit I:


Lauder Adventures Limited (LAL) was incorporated over 40 years ago as an amusement park and golf course. Over time, a nearby city has grown to the point where it borders on LAL's properties. In recent years LAL's owners, who are all members of one family, have seen LAL's land values increase significantly. LAL's majority shareholder, Hassan Poosti, owns 55% of the outstanding shares and is not active in LAL's day-to-day activities.
Last year, Hassan hired a new chief executive officer, Leo Titan. Leo has a reputation for being an aggressive risk taker. Hassan is committed, and has the personal financial resources required, to support Leo's plans.
Eight months ago, LAL became the successful bidder for a new sports franchise, in conjunction with a minority partner. Under the terms of the franchise agreement, LAL is required to build a sports arena, which is currently being constructed. The arena is being built on a section of the amusement park. Another section of the amusement park is being relocated to ensure that the entrances to the arena are close to public transportation and parking. Consequently, some of the rides will be relocated. LAL is the sole owner of the arena at present.
The sports franchise is separately incorporated as Northern Sports Limited (NSL); LAL holds 75% of the shares in the company. Another bid is being prepared by NSL to obtain a second sports franchise so that the arena can be used more often. NSL will be required to lease space from LAL when the arena is completed, in about 22 months.
For the first two sports seasons, NSL will have to lease arena space from Aggressive Limited (AL). During this time, NSL does not expect to be profitable because 
• it may take time to build a competitive team; 
• AL is charging a high rent, and it is not giving NSL a share of concession (hot dogs, drinks) revenue; 
• AL cannot make the better dates (e.g., Saturday night) available to NSL to attract sports fans; and 
• as a newcomer to the league, NSL is restricted with regard to the players who are available to it and the days of the week it can play in its home city. 
Consequently, NSL has arranged to borrow funds from LAL and from others to finance costs and losses.
Your employer, Fabio & Fox, Chartered Professional Accountants, has conducted the audit of LAL for several years. LAL has tended to be marginally profitable one year and then have losses the next year. The company has continued to operate because the directors know that the real estate holdings were becoming increasingly valuable.
Leo is expected to oversee the expanded accounting and finance functions in the company. He has met with you and the partner in charge of the LAL audit and discussed various issues related to the year ending September 30, Year 8. His comments are provided in Exhibit I.
It is September 5, Year 8. You have been asked by the partner to prepare a report for him, which will be used for the next meeting with Leo. He would like you to discuss the accounting issues related to your discussion with Leo. The partner wants a thorough analysis of all important issues as well as support for your position. LAL has been and wishes to continue using IFRS.
In your review of documents, and as a result of various conversations, you have learned the following: 
1. The arena will be mortgaged, but only for about 50% of its expected cost. Lenders are concerned about the special-use nature of the arena and whether it will be successfully rented for other events such as concerts. 
2. The mortgage lenders to LAL and the non-controlling shareholders in NSL are both expected to want to see appraisals and financial statements before deciding whether to invest. Covenants will be required by the lenders to ensure that excessive expenditures are not undertaken and that cash is preserved. 
3. Leo does not intend to consolidate NSL until it is profitable. The investment in NSL will be reported on LAL's financial statements at cost. Thus, LAL's financial statements will also be used for income tax purposes. 
4. LAL's non-controlling shareholders are not active in the business and want quarterly financial statements in order to monitor progress and assess Leo's performance. The non-controlling shareholders have all expressed concern over Leo's growth strategy over the past year. Most are relying on LAL to supplement their income.

Exhibit I:


Lauder Adventures Limited (LAL) was incorporated over 40 years ago as an amusement park and golf course. Over time, a nearby city has grown to the point where it borders on LAL's properties. In recent years LAL's owners, who are all members of one family, have seen LAL's land values increase significantly. LAL's majority shareholder, Hassan Poosti, owns 55% of the outstanding shares and is not active in LAL's day-to-day activities.
Last year, Hassan hired a new chief executive officer, Leo Titan. Leo has a reputation for being an aggressive risk taker. Hassan is committed, and has the personal financial resources required, to support Leo's plans.
Eight months ago, LAL became the successful bidder for a new sports franchise, in conjunction with a minority partner. Under the terms of the franchise agreement, LAL is required to build a sports arena, which is currently being constructed. The arena is being built on a section of the amusement park. Another section of the amusement park is being relocated to ensure that the entrances to the arena are close to public transportation and parking. Consequently, some of the rides will be relocated. LAL is the sole owner of the arena at present.
The sports franchise is separately incorporated as Northern Sports Limited (NSL); LAL holds 75% of the shares in the company. Another bid is being prepared by NSL to obtain a second sports franchise so that the arena can be used more often. NSL will be required to lease space from LAL when the arena is completed, in about 22 months.
For the first two sports seasons, NSL will have to lease arena space from Aggressive Limited (AL). During this time, NSL does not expect to be profitable because 
• it may take time to build a competitive team; 
• AL is charging a high rent, and it is not giving NSL a share of concession (hot dogs, drinks) revenue; 
• AL cannot make the better dates (e.g., Saturday night) available to NSL to attract sports fans; and 
• as a newcomer to the league, NSL is restricted with regard to the players who are available to it and the days of the week it can play in its home city. 
Consequently, NSL has arranged to borrow funds from LAL and from others to finance costs and losses.
Your employer, Fabio & Fox, Chartered Professional Accountants, has conducted the audit of LAL for several years. LAL has tended to be marginally profitable one year and then have losses the next year. The company has continued to operate because the directors know that the real estate holdings were becoming increasingly valuable.
Leo is expected to oversee the expanded accounting and finance functions in the company. He has met with you and the partner in charge of the LAL audit and discussed various issues related to the year ending September 30, Year 8. His comments are provided in Exhibit I.
It is September 5, Year 8. You have been asked by the partner to prepare a report for him, which will be used for the next meeting with Leo. He would like you to discuss the accounting issues related to your discussion with Leo. The partner wants a thorough analysis of all important issues as well as support for your position. LAL has been and wishes to continue using IFRS.
In your review of documents, and as a result of various conversations, you have learned the following: 
1. The arena will be mortgaged, but only for about 50% of its expected cost. Lenders are concerned about the special-use nature of the arena and whether it will be successfully rented for other events such as concerts. 
2. The mortgage lenders to LAL and the non-controlling shareholders in NSL are both expected to want to see appraisals and financial statements before deciding whether to invest. Covenants will be required by the lenders to ensure that excessive expenditures are not undertaken and that cash is preserved. 
3. Leo does not intend to consolidate NSL until it is profitable. The investment in NSL will be reported on LAL's financial statements at cost. Thus, LAL's financial statements will also be used for income tax purposes. 
4. LAL's non-controlling shareholders are not active in the business and want quarterly financial statements in order to monitor progress and assess Leo's performance. The non-controlling shareholders have all expressed concern over Leo's growth strategy over the past year. Most are relying on LAL to supplement their income.

Exhibit I:





Transcribed Image Text:

1. In order to build a road to the arena's parking lot, two holes of the 18-hole golf course will be relocated next spring. Costs of $140,000 are expected to be incurred this year in design, tree planting, ground prepara- tion, and grass seeding in order to ready the area for next spring. These costs are to be capitalized as part of the golf course lands, along with related property taxes of $13,000 and interest of $15,000. 2. In May Year 8, LAL acquired, for $4.25 million, all of the shares of an amusement park in a different city when its land lease expired. The amusement park company was wound up and the equipment, rides, con- cessions, and other assets are being transported to LAL at a cost of $350,000. The estimated fair value of the assets and liabilities (according to Leo) is as follows: (continued) $ Concession prizes (e.g., stuffed animals) Rides and games 22,500 4,200,000 Equipment and parts 1,650,000 Electrical supplies 75,000 Lighting and signs Estimated present value of tax loss carry-forward 100,000 700,000 6,747,500 Liabilities 1,200,000 Net assets $5,547,500 LAL expects to spend approximately $400,000 in getting the assets in operating order and $500,000 on foun- dations and site preparations for the rides. Leo wants to "capitalize as much as possible." 3. Approximately $600,000 will be required to relocate the rides that are currently on land that is needed for the arena. This amount is to be capitalized, net of scrap recovery of $60,000 on dismantled and redundant equipment. Virtually all the rides were fully depreciated years ago. 4. To assist in financing the new ventures, LAL sold excess land to developers who intend to construct a shopping centre, office buildings, and expensive homes adjacent to the golf course and away from the amusement park. The developers and LAL agreed to these terms: $ 6,000,000 Paid to LAL on May 1, Year 8 To be paid to LAL on March 1, Year 9 10,000,000 To be paid to LAL on March 1, Year 10 8,000,000 $24,000,000 The land is to be turned over to the developers on or about February 1, Year 9, but the sale is to be reported in fiscal Year 8. 5. An additional "contingent profit" will accrue to LAL if the developers earn a return on investment of more than 25% when they resell the newly constructed buildings. Leo wants a note to the Year 8 financial state- ments that describes the probability of a contingent gain. 6. The excess land that was sold to developers was carried on LAL's books at $1.35 million, on a pro rata cost basis. Leo would like to revalue the remaining land from $5.4 million to about $100 million in the Year 8 financial statements. 7. The golf course has been unprofitable in recent years. However, green fees are to be raised and specific tee- off times will be allotted to a private club, which is currently being organized. Members of the private club will pay a non-refundable entrance fee of $2,000 per member plus $100 per month for five years. The $2,000 is to be recorded as revenue on receipt. Approximately $350,000 is to be spent to upgrade the club facilities. 8. Leo wants to capitalize all costs of NSL on NSL's books until it has completed its first year of operations. In addition to the franchise fee, $20 million will have to be spent on the following: Acquisition of player contracts Advertising and promotion $12,000,000 1,500,000 Equipment 3,200,000 Wages, benefits, and bonuses 6,800,000 Other operating costs 3,300,000 26,800,000 Less: Revenue: Ticket sales (6,000,000) Other (800,000) $20,000,000 (continued) The value of players can change quickly, depending upon their performance, injuries, and other factors. 9. The new sports arena will have private boxes in which a company can entertain groups of clients. The boxes are leased on a five-year contract basis, and they must be occupied for a fixed number of nights at a minimum price per night. To date, 12 boxes have been leased for $15,000 per box for a five-year period, exclusive of nightly charges. A down payment of $3,000 was required; the payments have been recorded as revenue. 10. Three senior officers of LAL, including Leo, receive bonuses based on income before income taxes. The three have agreed to have their fiscal Year 8 bonuses accrued in fiscal Year 9 along with their fiscal Year 9 bonuses. Actual payments to them are scheduled for January Year 10. 11. Insurance premiums on the construction activity that is taking place total $1.4 million in fiscal Year 8, and to date they have been capitalized. 12. A $500,000 fee was paid to a mortgage broker to arrange financing for LAL. This amount has been recorded as "Other assets." No financing has been arranged to date.


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> You, the controller, recently had the following discussion with the president: President: I just don't understand why we can't recognize the revenue from the intercompany sale of inventory on the consolidated financial statements. The subsidiary company

> Gerry's Fabrics Ltd. (GFL), a private company, manufactures a variety of clothing for women and children and sells it to retailers across Canada. Until recently, the company has operated from the same plant since its incorporation under federal legislati

> Beaver Ridge Oilers' Players Association and Mr. Slim, the CEO of the Beaver Ridge Oilers Hockey Club (Club), ask for your help in resolving a salary dispute. Mr. Slim presents the following income statement to the player representatives: Mr. Slim argu

> Total Protection Limited (TPL) was incorporated on January 1, Year 1, by five homebuilders in central Canada to provide warranty protection for new-home buyers. Each shareholder owns a 20% interest in TPL. While most homebuilders provide one-year warrant

> It is now mid-September Year 3. Growth Investments Limited (GIL) has been owned by Sam and Ida Growth since its incorporation under the Canada Business Corporations Act many years ago. The owners, both 55 years of age, have decided to effect a corporate

> BIO Company is a private company. It employs 30 engineers and scientists who are involved with research and development of various biomedical devices. All of the engineers and scientists are highly regarded and highly paid in the field of biomedical rese

> It is September 15, Year 8. The partner has called you, CPA, into his office to discuss a special engagement related to a purchase agreement. John Toffler, a successful entrepreneur with several different businesses in the automotive sector, is finalizin

> When Valero Energy Corp. acquired Ultramar Diamond Shamrock Corp. (UDS) for US$6 billion, it created the second-largest refiner of petroleum products in North America, with over 23,000 employees in the United States and Canada, total assets of $10 billio

> Briefly explain why the Canadian AcSB decided to create a separate section of the CPA Canada Handbook for private enterprises.

> Factory Optical Distributors (FOD) is a publicly held manufacturer and distributor of high-quality eyeglass lenses located in Burnaby, British Columbia. For the past 10 years, the company has sold its lenses on a wholesale basis to optical shops across C

> On December 31, Year 7, Maple Company issued preferred shares with a fair value of $1,200,000 to acquire 24,000 (60%) of the common shares of Leafs Limited. The Leafs shares were trading in the market at around $40 per share just days prior to and just a

> Planet Publishing Limited (Planet) is a medium-sized, privately owned Canadian company that holds exclusive Canadian distribution rights for the publications of Typset Daily Corporation (TDC). Space Communications Ltd. (Space), an unrelated privately own

> How are translation exchange gains and losses reflected in financial statements if the foreign operation's functional currency is the Canadian dollar? Would the treatment be different if the foreign operation's functional currency were not the Canadian d

> What translation method should be used for a subsidiary that operates in a highly inflationary environment? Why?

> What difference does it make whether the foreign operation's functional currency is the same or different than the parent's presentation currency? What method of translation should be used for each?

> What should happen if a foreign subsidiary's financial statements have been prepared using accounting principles different from those used in Canada?

> Define a foreign operation as per IAS 21.

> How are gains and losses on financial instruments used to hedge the net investment in a foreign operation reported in the consolidated financial statements when the PCT method is used to translate the foreign operation?

> Explain how the acquisition cost is determined for a reverse takeover.

> Why might a company want to hedge its balance sheet exposure? What is the paradox associated with hedging balance sheet exposure?

> What are the three major issues related to the translation of foreign currency financial statements?

> Would hedge accounting be used in a situation in which the hedged item and the hedging instrument were both monetary items on a company's statement of financial position? Explain.

> If the sales of a foreign subsidiary all occurred on one day during the year, would the sales be translated at the average rate for the year or the rate on the date of the sales? Explain.

> When translating the financial statements of the subsidiary at the date of acquisition by the parent, the exchange rate on the date of acquisition is used to translate plant assets rather than the exchange rate on the date when the subsidiary acquired th

> Explain how the FCT method produces results that are consistent with the normal measurement and valuation of assets and liabilities for domestic transactions and operations.

> "If the translation of a foreign operation produced a gain under the FCT method, the translation of the same company could produce a loss if the operation were translated under the PCT method." Do you agree with this statement? Explain.

> The amount of the accumulated foreign exchange adjustments appearing in the translated financial statements of a subsidiary could be different from the amount appearing in the consolidated financial statements. Explain how.

> Does the FCT method use the same unit of measure as the PCT method? Explain.

> The FCT and PCT methods each produce different amounts for translation gains and losses due to the items at risk. Explain.

> When will the premium paid on a forward contract to hedge a firm commitment to purchase inventory be reported in income under a cash flow hedge? Explain.

> List some ways that a Canadian company could hedge against foreign currency exchange rate fluctuations.

> Differentiate between the accounting for a fair value hedge and a cash flow hedge.

> Differentiate between a spot rate and a closing rate.

> Describe when to use the closing rate and when to use the historical rate when translating assets and liabilities denominated in a foreign currency. Explain whether this practice is consistent with the way we normally measure assets and liabilities.

> How are foreign-currency-denominated assets and liabilities measured on the transaction date? How are they measured on a subsequent balance sheet date?

> Differentiate between a spot rate and a forward rate.

> You read in the newspaper, "One U.S. dollar can be exchanged for 1.15 Canadian dollars." Is this a direct or an indirect quotation? If your answer is indirect, what is the direct quotation? If your answer is direct, what is the indirect quotation?

> What is the difference between pegged and floating exchange rates?

> What is meant by hedge accounting?

> What is the suggested financial statement presentation of hedge accounts recorded under the gross method? Why?

> When long-term debt hedges a revenue stream, a portion of the long-term debt becomes exposed to the risk of changes in exchange rates. Why is this?

> How does the accounting for a fair value hedge differ from the accounting for a cash flow hedge of an unrecognized firm commitment?

> Explain the application of lower of cost and net realizable value to inventory that was purchased from a foreign supplier.

> If a foreign-currency-denominated payable has been hedged, why is it necessary to adjust the liability for balance sheet purposes?

> What are some typical reasons for acquiring a forward exchange contract?

> Briefly summarize the accounting issues arising from foreign-currency-denominated transactions.

> A parent company has recently acquired a subsidiary. On the date of acquisition, both the parent and the subsidiary had unused income tax losses that were unrecognized in their financial statements. How would this affect the consolidation figures on the

> X Company recently acquired control over Y Company. On the date of acquisition, the fair values of Y Company's assets exceeded their tax bases. How does this difference affect the consolidated balance sheet?

> Explain how the revenue recognition principle supports the recognition of a portion of gains occurring on transactions between the venturer and the joint venture.

> A venturer invested non-monetary assets in the formation of a new joint venture and did not receive any monetary consideration. The fair value of the assets invested was greater than the carrying amount in the accounting records of the venturer. Explain

> The treatment of an unrealized intercompany inventory profit differs between a parent subsidiary affiliation and a venture-joint venture affiliation. Explain where the differences lie.

> Briefly outline how the presentation of assets and liabilities on the statement of financial position of a government differs from the presentation shown on the balance sheet of a typical business enterprise.

> Y Company has a 62% interest in Z Company. Are there circumstances where this would not result in Z Company being a subsidiary of Y Company? Explain.

> Explain how to account for an interest in a joint operation.

> Explain how the definitions of assets and liabilities can be used to support the consolidation of special-purpose entities.

> What is a reverse takeover, and why is such a transaction entered into?

> Explain how the use of the information provided in segment disclosures can aid in the assessment of the overall profitability of a company.

> What sort of reconciliations are required for segmented reporting?

> In accordance with IFRS 8 Operating Segments, answer the following: (a) What information must be disclosed about business carried out in other countries? (b) What information must be disclosed about a company's products or services? (c) What information

> For each of its operating segments that require separate disclosure, what information must an enterprise disclose?

4.99

See Answer