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Introduction to Canadian Advanced Accounting International Convergence

This chapter provides an introduction to the problem of international convergence in advanced accounting, specifically in relation to Canadian standards. It discusses the adoption of International Financial Reporting Standards (IFRSs) and their application in investments in equity securities, business combinations, and the overlap between these two areas. The chapter also highlights the relevant standards and provides examples of the application of IFRSs.

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Introduction to Canadian Advanced Accounting International Convergence

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  1. Chapter 1 Introduction To Canadian Advanced Accounting

  2. 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.

  3. 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

  4. Content Of This Text • Reflects CICA Handbook to 1st quarter of 2007 • Additional emphasis on concepts • Discussion of current and anticipated IFRSs • Examples of the application of IFRSs

  5. Investments In Equity Securities Separate Legal Entities Cash – Other Consideration Investor Investee Equity Securities

  6. Investments In Equity Securities • Strategic Investments • Control present: Subsidiary • Significant influence present: Significantly Influenced Company • Joint control present: Joint Venture

  7. Investments In Equity Securities • Non-Strategic Investments • 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

  8. Business Combinations Separate Economic Entities Business Entity A Business Entity B Combined Entity

  9. 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)

  10. Business Combinations • Alternatives to the “purchase” method • Pooling of interests • New entity approach

  11. The Overlap Investments In Equity Securities Business Combinations The Overlap

  12. 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)

  13. Standards • Business Combinations • CICA Section 1581: Business Combinations • CICA Section 3062: Goodwill • IFRS No. 3: Business Combinations • IAS No. 38: Intangible Assets

  14. Standards • Equity Investments • CICA Section 1590: Subsidiaries • CICA Section 1600: Consolidated Statements • IAS No. 27: Consolidated and Separate Financial Statements

  15. Standards • Significantly Influenced Companies • CICA Section 3051: Investments • IAS No. 28: Investments In Associates

  16. Standards • Joint Ventures • CICA Section 3055: Interests In Joint Ventures • IAS No. 31: Interests In Joint Ventures

  17. End Of Chapter 1

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