Chapter 1
Recognition and Measurement
24
c) The CFO’s father, a successful real estate magnate, provides Red Brick with rental space for
its storage and office space and charges rent at fair market rates on a monthly basis. As he
is a family member, he does not invoice Red Brick and hasn’t been doing so since the firm’s
inception.
d) The company operates a fleet of leased vehicles for transportation and delivery of
supplies. While each lease has a specific, identifiable interest rate, Red Brick uses its own
standard 5% interest rate when reporting the interest expense on the leases because it’s
more convenient.
e) The bank granted Red Brick a loan with accounts receivable used as collateral. Red Brick
informed the bank of a potential bad-debt write-off only after receiving the loan.
f ) The company initially adopted the IFRS framework, but abandoned it one year later,
then adopted IFRS again the following year due to regulatory requirements for a specific
contract. The contract is now finished and Red Brick reports under ASPE again this year.
