1. Accounting Standards

2. Balance sheet practice
Exeter Eastern Company, owned by you, listed the following on March 31, 2016.
Prepare a Balance Sheet for the company using the following information:
A/R – Hensal, 700 A/R – Zurich, 400 A/R – Dashwood, 800 Cash, 2000 Land, 55,000 Mortgage, 70,000 Trucks, 120,000
Supplies, 200
A/P – Seaforth, 1000
A/P – Lucan, 600
Insurance, 1000
Building, 100,000
Furniture, 5000
Bank Loan, 20,000

3. Scenario
Wal-Mart is looking to expand in Canada by purchasing the old Target location in the Conestoga Mall for $1,000,000. Because they feel that they can better utilize this location, they list the building at $4,000,000 on their balance sheet.
What will this do to their net worth?
Do you agree with this?
What rule would you propose to fix this?

4. The Cost Principle
In an attempt to offer consistency, accountants are forced to record the value of assets at their historical cost price. This may be adjusted down at a later date (Grade 12)

5. Accounting Standards
It is important to have standards in accounting practices so that statements are reliable, consistent, verifiable, and objective
Historically
GAAP – Generally Accepted Accounting Principles
Came from CICA Handbook
CICA committees formed AcSB (Accounting Standards Board)
In 2006 – AcSB announced process to replace the Canadian GAAP with IFRS (International Financial Reporting Standards).

6. Public Companies
IFRS start date was Jan – for public companies only (listed on stock exchanges)
International standards that will help Canadian businesses communicate globally.

7. Private Companies
Private companies not listed on stock exchanges can follow ASPE (Accounting Standards for Private Enterprises).
ASPE was developed from traditional Canadian standards – fewer changes than IFRS
As of Jan – private companies can choose which standard they would like to follow.

8. Accounting Standards
Throughout the course we will look into a few standards and principles that relate to the topics in our textbook.
There are 4 key standards that relate to the balance sheet:
The Cost Principle
Business Entity Concept
Continuing Concern Concept
The Revaluation Model

9. Business Entity Concept
Keeps the personal affairs of the owner separate from the affairs of the business organization.
Therefore the owner should not include personal assets on the balance sheet (I.e. the family home)
The balance sheet of the business must reflect the financial position of the business alone.
Important in ASPE and IFRS just as it was in Canadian GAAP.

10. The Continuing Concern Concept
Assumes the business will continue to operate unless it is known that it will not.
This assumption frees the reader of a balance sheet from worrying about the market values of assets and whether debts will have to be paid before they are due.

11. The Revaluation Model
Under IFRS: allows for modifications to the cost principle.
Allows accountants to change the value of particular assets based on market conditions.

12. Homework
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