CHAPTER 1- THE CANADIAN FINANCIAL REPORTING

CHAPTER 1- THE CANADIAN FINANCIAL REPORTING - SOLUTIONS TO...

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SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 1-1 Accounting has the responsibility of measuring company performance accurately and fairly on a timely basis. This enables investors and creditors to assess the relative risks and returns of investment opportunities and channel resources more effectively. If a company’s financial performance is measured accurately, fairly, and on a timely basis, the right managers and companies are able to attract investment capital. Unreliable and irrelevant information leads to poor capital allocation, which adversely affects the securities market and ultimately the performance of the economy as a whole. BRIEF EXERCISE 1-2 Some stakeholders using financial accounting information and financial statements include: Investors – These stakeholders are interested in the performance of their investment in the company. They will use the financial statements to evaluate management stewardship and effectiveness. Creditors – These stakeholders are interested in evaluating the company to decide whether to lend money to it. They will use the statements to evaluate the risk that will be taken in making the loan. For example, lenders want to know whether the company will be able to repay its loans when due and service interest and principal on a timely basis. Canada Revenue Agency (CRA) – These stakeholders establish the rules for how taxable income will be measured. They
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