Chapter 1
Recognition and Measurement
15
f ) I know that we usually prepare financial statements semi-annually but I’m planning to take
the company jet for a spin to the Caribbean around the semi-annual submission deadline,
so let’s defer the semi-annual statements by three months.
AP-5A (
3
)
Snobis Ltd. is a privately held manufacturer of high-end parkas. As the company experiences
strong growth, the management has decided to undergo a review engagement this year in
the hopes of making the financial statements more appealing to potential investors when
they take their company public. The auditors identified the following activities.
Required
For each activity the auditors identified, indicate the underlying assumptions and concepts
of financial reporting that have been violated. Include any other issues that have to be
considered.
a) The company reports under ASPE and wants to continue to report using this framework
as the costs of implementing IFRS are considered by management to be beyond the
potential benefits this may entail.
b) The management of Snobis occasionally draws out small cash amounts from the
corporate bank account to purchase groceries and small household items for themselves.
c) Much of the sales this year were generated from the Japanese market. The sales are
recorded in Japanese yen on the income statement but all other items are reported in
Canadian dollars.
