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You, CPA, work as a consultant on various engagements. Your client,...

You, CPA, work as a consultant on various engagements. Your client, Over The Edge Ltd. (OTE), has grown from a small custom snowboard manufacturer based in Whistler, British Columbia, servicing the local market, to a national success. Recently, OTE's snowboards were used by a gold medallist in the Winter Olympics!


Prepare an analysis of the accounting issues described below. OTE reports its financial statements in accordance with IFRS. Describe the issue, analysis with criteria and recommendation for each issue.


Foreign Currency Transactions

Manufacturing equipment with a useful life of 10 years was purchased from a U.S. supplier for US$200,000 in November. At the time, the exchange rate in effect was US$1 = C$1.22 and the equipment and associated payable were recorded at $244,000. At year end, the payable was still outstanding and both it and the equipment were still recorded at $244,000. The year-end exchange rate was US$1 = C$1.32. Misty is not sure if either the initial or year-end amounts were recorded correctly, but she would like to get a better understanding of how to account for this transaction, as she expects OTE will engage in more transactions with U.S. suppliers in the future.


Intangible Assets

In mid-December, the exclusive rights to a customer list were acquired for $75,000 from a competitor. The price paid for the customer list was based on a valuation prepared by a Chartered Business Valuator. This amount was expensed in the financial statements.

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