Chapter 1
Introduction To
Canadian Advanced Accounting
International Convergence
• The Problem
– Multi-nationals operate in many
different countries.
– Multi-nationals raise funds in
many different capital markets.
– Creates need for international
standards.
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International Convergence
• The Solution:
Adoption of IFRSs
– Already in place in Europe
– Canada:
• Publicly accountable by 2011
• Non-publicly accountable under
discussion
– U.S. is moving towards
convergence
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Content Of This Text
• Reflects CICA Handbook to 1st
quarter of 2009
• Additional emphasis on
concepts
• Discussion of current and
anticipated IFRSs
• Examples of the application of
IFRSs
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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
Investments In Equity Securities
Cash or Other Consideration
Investor
Investee
Equity Securities
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Investments In Equity Securities
• Strategic Investments
– Control present: Subsidiary
– Significant influence present:
Significantly Influenced Company
(includes associated company)
– Joint control present: Joint Venture
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Investments In Equity Securities
• Non-Strategic Investments (Section 3855)
– Held-For-Trading
• Objective is generating a profit from
short term fluctuations in price
– Available-For-Sale
• Non-strategic investments that are
not classified as held-for-trading
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Business Combinations
Business Entity A
Business Entity B
Combined Entity
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Business Combinations
• Classification
– Current view is that all
business combinations
involve an acquirer
– This means they must be
treated as a purchase
(acquisition of assets)
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The Overlap
Investments
In Equity
Securities
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The
Overlap
Business
Combinations
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The Overlap
• Investments In Equity Securities
– Separate legal entities
• Business Combinations
– One economic entity
• Overlap: Business combinations where
the combining entities remain legally
separate (consolidations)
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Standards
• Business Combinations
– CICA Section 1582: Business Combinations
– CICA Section 3064: Goodwill and Intangible
Assets
– IFRS No. 3: Business Combinations
– IAS No. 38: Intangible Assets
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Standards
• Equity Investments
– CICA Section 1590: Subsidiaries
– CICA Section 1601/1602: Consolidated
Statements/Non-Controlling Interests
– IAS No. 27: Consolidated and Separate
Financial Statements
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Standards
• Significantly Influenced Companies
– CICA Section 3051: Investments
– IAS No. 28: Investments In Associates
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Standards
• Joint Ventures
– CICA Section 3055: Interests In Joint
Ventures
– IAS No. 31: Interests In Joint Ventures
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