Chapter 1 Introduction To Canadian Advanced Accounting

© 2009 C. Byrd Inc.2 International Convergence The ProblemThe Problem –Multi-nationals operate in many different countries. –Multi-nationals raise funds in many different capital markets. –Creates need for international standards.

© 2009 C. Byrd Inc.3 International Convergence The Solution: Adoption of IFRSsThe Solution: Adoption of IFRSs –Already in place in Europe –Canada: Publicly accountable by 2011Publicly accountable by 2011 Non-publicly accountable under discussionNon-publicly accountable under discussion –U.S. is moving towards convergence

© 2009 C. Byrd Inc.4 Content Of This Text Reflects CICA Handbook to 1 st quarter of 2009Reflects CICA Handbook to 1 st quarter of 2009 Additional emphasis on conceptsAdditional emphasis on concepts Discussion of current and anticipated IFRSsDiscussion of current and anticipated IFRSs Examples of the application of IFRSsExamples of the application of IFRSs

Canadian standards to be After the 2011 changeover date, there will be 4 separate sets of Canadian standards –Standards for publicly accountable enterprises –Standards for private enterprises –Standards for not-for-profit organizations –Standards for public sector (government) entities Text will focus on standards for publicly accountable enterprises

© 2009 C. Byrd Inc.6 Investments In Equity Securities InvestorInvestee Cash or Other Consideration Equity Securities

© 2009 C. Byrd Inc.7 Investments In Equity Securities Strategic InvestmentsStrategic Investments –Control present: Subsidiary –Significant influence present: Significantly Influenced Company (includes associated company) –Joint control present: Joint Venture

© 2009 C. Byrd Inc.8 Investments In Equity Securities Non-Strategic Investments (Section 3855)Non-Strategic Investments (Section 3855) –Held-For-Trading Objective is generating a profit from short term fluctuations in priceObjective is generating a profit from short term fluctuations in price –Available-For-Sale Non-strategic investments that are not classified as held-for-tradingNon-strategic investments that are not classified as held-for-trading

© 2009 C. Byrd Inc.9 Business Combinations Business Entity ABusiness Entity B Combined Entity

© 2009 C. Byrd Inc.10 Business Combinations ClassificationClassification –Current view is that all business combinations involve an acquirer –This means they must be treated as a purchase (acquisition of assets)

© 2009 C. Byrd Inc.11 The Overlap Investments In Equity Securities Business Combinations The Overlap

© 2009 C. Byrd Inc.12 The Overlap Investments In Equity SecuritiesInvestments In Equity Securities –Separate legal entities Business CombinationsBusiness Combinations –One economic entity Overlap: Business combinations where the combining entities remain legally separate (consolidations)Overlap: Business combinations where the combining entities remain legally separate (consolidations)

© 2009 C. Byrd Inc.13 Standards Business CombinationsBusiness Combinations –CICA Section 1582: Business Combinations –CICA Section 3064: Goodwill and Intangible Assets –IFRS No. 3: Business Combinations –IAS No. 38: Intangible Assets

© 2009 C. Byrd Inc.14 Standards Equity InvestmentsEquity Investments –CICA Section 1590: Subsidiaries –CICA Section 1601/1602: Consolidated Statements/Non-Controlling Interests –IAS No. 27: Consolidated and Separate Financial Statements

© 2009 C. Byrd Inc.15 Standards Significantly Influenced CompaniesSignificantly Influenced Companies –CICA Section 3051: Investments –IAS No. 28: Investments In Associates

© 2009 C. Byrd Inc.16 Standards Joint VenturesJoint Ventures –CICA Section 3055: Interests In Joint Ventures –IAS No. 31: Interests In Joint Ventures

© 2009 C. Byrd Inc.17