IFRS 9, Impairment of Non-Financial Assets, Income Taxes - Notes to Financials

This document provides information about IFRS 9, impairment of non-financial assets, and income taxes through the notes to financials of a company. It explains the impact of these accounting standards on the company's financial statements.

BUSINESS 1
BUSINESS

BUSINESS 2
Answer 1:
As per the notes to the financials of the company:
The company has applied IFRS 9 which deals with the financial instruments. During the
period of July, 2014, the IASB released the final version of this accounting standard which
replaces the accounting standard IAS 39 that deals with the financial instruments, recognition
and the measurement. This new accounting standard includes the introduction of a new
approach for the purposes of classifying the financial assets that are based upon the way in
which the company manages its financial assets and also characterises of the cash flows of
the financial assets thereby replacing the rules as have been laid down under IAS 39. The
majority of the rules and the requirements under the IAS 39 goes in for the classification and
the measurement of the financial liabilities that have bene carried forward under IFRS 9. This
standard also introduces the new model of hedge accounting which is more inclines towards
achieving the objectives of the management along with the new and expected model of the
credit loss for the purposes of calculating the impairment on the financial assets of the
company which again replaces the loss model under IAS 39. IFRS 9 is effective for the
period which begins on April 1, 2018. For the company. The management and the auditors of
the company have concluded that the adoption of this standard on accounting would have no
impact on the consolidated financial statements that have been prepared.
The second disclosure is that of the impairment of the non-financial assets. The company
conducts an impairment testing for goodwill which depends upon the internal estimates of the
fair values less any costs incurred towards the disposal of the asset and also goes on to use the
various valuation models such as the discounted cash flows model. The main assumptions on
which the managed bases its determination of the fair values less any costs incurred towards
the disposal of the asset include the estimate growth rates the rate at which the company pays

BUSINESS 3
taxes and the post-tax rates of discounts. These are the estimates that include the methods that
have bene used and that are expected to have a material impact over the respective values and
this affects the amount of the goodwill that has been impaired. Whenever there is any
property, plant or equipment or any other intangible assets that are stated for impairment,
then the recoverable amount of those assets are determination which includes the use of
various estimates made by the management and this is expected to have a material effect on
the respective values and would ultimately affect the amount of the impairment.
The third note relates with the income taxes. The company is subject to many income tax
laws in a number of different jurisdictions. This is the judgment which is required for the
purposes of the determination of the provision of the income taxes. The determination of the
tax liabilities and the assets includes the involvement of the uncertainties in the interpretation
of the various complex tax regulations. The potential taxation liabilities is based upon the
weighted average probability of the various possible outcomes. The difference between the
actual results and the estimates that have been made affects the liability of the income taxes
and the deferred tax liabilities in the period in which there is a determination with regard to
the taxation liabilities has been made. The amount of the deferred tax assets has been
recognised to the extent it is likely that the taxable profit is as against the losses that could be
utilised. There are some major judgments that are required for the purposes of determining
the amount of the deferred tax assets that could be recognised. This is based upon the likely
timing and on the level of the future taxable profits put together with the future taxation
planning strategies. The amount of the deferred tax assets or the liabilities undergo a change
when there is an existence of any future strategy that affects the timing difference of the
various assets or the liabilities (Annual report, 2018).
Answer 2:

BUSINESS 4
The company that has more than 50% of cash and cash equivalents and the accounts
receivables is Hexo Corp which is the company which is based in Canada. The company
creates and produces the products that service the Canadian cannabis market. The company
has the production capacity of about 30,000 square feet. The company serves the adult use
market under the HEXO name of the brand and serves the medical cannabis clients through
its Hydropothecary brand. The company has serves its customers various different products
(Reuters, 2019).
The following table shows the relevant %:
Particulars 2018
(Amounts in
$)
Cash and cash
equivalents
2447,88,518.0
0
Accounts receivables
6,43,596.0
0
Total Assets
3349,97,433.0
0
% 73.26%
(Hexo Annual report 2018).

BUSINESS 5
The liquid assets are capable of being converted into cash as and when required. These are
expected to be used in the case of an emergency or in the case of an unexpected expense.
The more liquid assets of the company has, the more is its liquidity. Usually, it is said that the
company should have the correct blend of liquid asset which is the proportion between the
current assets and the current liabilities. The company should have enough liquid assets that it
is able to pay off the current liabilities.
The liquid assets are good but then there is too much of a good thing. If all the money is
invested into the liquid assets of the company, then the company would have no money to
invest in the other assets that help in generation of revenue for the company. The long term
savings for retirement seems to be a good option since the same is required to be maintained
in 401 (k) or as per the IRA accounts for the purposes of taking the taxation benefits. These
assets are considered to be liquid since an early withdrawals would penalised and hence, one
would be less tempted to touch them (HDFC fund, 2019).
Answer 3:
In this respect, I would blow the whistle and inform the relevant authorities through an
individual email as to what is being done in the hotel and the reason for the decrease in the
amount of the revenue for the golf course.
Answer 4:
With regard to the revenue policy, the company ships the products when there is an
expectation of receiving the payment from the customer. The company would report the
revenue at its fair value when all of the risks and the rewards that are associated with the
ownership of the goods has been transferred onto the customers and when there is a
reasonable assurance that the amount shall be receivable in future.

BUSINESS 6
Answer 5:
The company chosen is CAE Inc.
The following table shows the relevant calculation:
Particulars
(Amounts in
$)
Property, plant and equipment
1,803.9
0
Intangible assets
1,055.6
0
Other assets
482.0
0
Total Assets
5,719.2
0
Relevant % 58.43%
The company CAE Inc is the company which is based in Canada and is engaged in the
activity of simulation technologies, modelling technologies along with the provision of the
training services to the airlines, manufacturers of the aircraft, the health care specialist’s etc.
the company was founded in the year 1947 and has bene operating in 35 different countries.
During the year 2017, the annual revenue of the company was CAD $2.705 billion. During
the year 2018, the company went on to invest $1 billion into the development of the

BUSINESS 7
simulation all across the multiple industries. About $200 million was provided by the
government of Canada and the government of Quebec. (CAE, 2019).
Answer 6:
The company undertaken for this part is Hexo Inc, With regard to the impairment of the long
lived assets which includes the property, plant and equipment, are reviewed in an annual
basis and are measured as at the end of the each year or whenever there is certain events or
changes in the market conditions that may indicate the decrease in the fair value of the assets.
For the purposes of testing the impairment, these assets have to be tested together or in a
group into the smallest group of the assets that are capable of generating the cash inflows
from the use of the large cash inflows or the other assets or the group of the assets, which are
referred to as the cash generating units. The recoverable amount of the asset is the higher of
the fair value less the costs of disposal and the value in use. In case, the carrying value is
more than the recoverable value, then the expense shall be charged as an expense as an
impairment expense. When there is a reversal of the impairment loss, then the loss shall be
reversed.
The following table shows the relevant adjustment in fair value:
Particulars
(Amounts in
$)
Fair value adjustment on
sale of inventory 22,88,975
Fair value adjustment on
biological assets -73,39,566
Total fair value -50,50,591

BUSINESS 8
adjustment

BUSINESS 9
References
Cae.com. (2019). About CAE. [online] Available at: https://www.cae.com/about-cae/
[Accessed 7 Jun. 2019].
Cae.com. (2019). Annual report 2018. [online] Available at:
https://www.cae.com/media/documents/Corporate/Financial_Reports/2018/
CAE_Financial_Report_FY18_EN.pdf [Accessed 7 Jun. 2019].
Editorial, R. (2019). ${Instrument_CompanyName} ${Instrument_Ric} Company Profile |
Reuters.com. [online] U.S. Available at: https://www.reuters.com/finance/stocks/company-
profile/HEXO.TO [Accessed 7 Jun. 2019].
S3.amazonaws.com. (2019). Hexo annual report 2018. [online] Available at:
https://s3.amazonaws.com/staticproduction/financial-statements/HEXO_2018_AR_EN.pdf
[Accessed 7 Jun. 2019].
www.hdfcfund.com. (2019). Investing in Liquid Funds. [online] Available at:
https://www.hdfcfund.com/learn/advanced/mutual-funds/59 [Accessed 7 Jun. 2019].