2. Based on the key accounting policies chosen in (8) above, describe how it relates to the strategic goals of Cineplex and explain whether these accounting principles adopted comply and support the company goals and stakeholder objectives.
3. In discussing with the President, you understand that one of the concern of being a public company is the complexity in financial reporting and compliance requirements. In addition to the proposed acquisition, the Board of Directors of Cineplex is considering the option of becoming a private company. You are asked to analyze how this will impact the financial reporting and statement presentation. Provide a description of which accounting policies would need to change or are no longer required if they decide to follow ASPE.
1.There are some key accounting policies that have critical importance for Cineplex and the industry; and the company is needed comply with these policies. For the preparation of the consolidated financial statements of the business, Cineplex complies with the Canadian generally accepted accounting principles, known as Canadian GAAP. The definition of this rules can be seen in International Financial Reporting Standards (IFRS) as set out CPA Canada Handbook – Accounting. The application of acquisition method can be seen by Cineplex for the purpose of business combination. For the purpose of valuation, the company uses the fair value accounting. The recognition of the financial assets and the liabilities is done based on the fair value (Kim, Shi and Zhou 2014).
It needs to be mentioned that Cineplex operates in the film and media industry; and for this reason the company has to follow some specific accounting rules and policies. When comparing the financial and accounting regulation of Cineplex with any airline company of the airline industry, it can be seen that there are some similarities as well as differences in the accounting policies. The following discussion shows some of the different as well as similar principles in the accounting policies of Cineplex and Air Canada, an airline company.
Both the companies that are Cineplex and Air Canada follows the principles of Canadian GAAP as set out in the CPA Canada Handbook.
It can be observed that both Cineplex and Air Canada complies with the standards and principles of IFRS for the overall preparations and presentation of their consolidated financial statements (Shah, Liang and Akbar 2013).
In case of the basis of measurement, both Cineplex and Air Canada prepare and presents their consolidated financial statements based on historical cost convention. However, for both the companies, exception can be seen for the revaluation of cash, cash equivalent and short-term investments (aircanada.com 2018).
Another major area of similarity between the policies of Cineplex and Air Canada is their loyalty program. For the part of loyalty program, Cineplex has introduced Scotiabank Theatre Pttawa to provide to provide D-BOX VR cinematic experience. At the same time, Air Canada has introduced Aeroplan that is a loyalty program for the passengers.
However, difference can be seen in the accounting for revenue for both the companies as the main sources of revenue for both the companies are different from each other. In case of Cineplex, the main sources of revenue are box office collection, income from food services, income from the sale of advanced tickets; and the company records the revenue at the time of the selling of the tickets and other products and services. On the other hand, the main sources of revenue are revenue from passengers, revenue from cargo flights, sale of tickers, refund of tickets, holiday packages and others (aircanada.com 2018).
Another major difference can be seen in the impairment of non-financial assets. In case of Cineplex, the company charge impairment on definite intangible assets like trademarks, patents, leases, trade names and others. However, Air Canada charges impairment mainly on indefinite lived tangible assets like international rout rights and slots, airport landing marketing based trade marks, take off rights and others.
Difference can also be seen in case of the accounting policies for depreciation. Cineplex charges depreciation on straight line method. At the same time, Air Canada charges depreciation on their fixed assets based on unit production method. Apart from all these, Cineplex and Air Canada have adopted same accounting policies for employee benefits, leases and financial instruments (aircanada.com 2018). The main reason for the difference in the accounting policies of these two companies is the difference in the nature of business operations.
2.As per the annual report of Cineplex, the presence of four major strategic goals can be seen; they are enhance and expand the existing infrastructure; capitalization on the core media strateghts; develop and scale more concepts for amusement and leisure; and obtain of the acquisitions and opportunities. At the same time, the presence of different stakeholders can be seen in the company like the shareholders, customers, employees, suppliers, community people, environment and others. The major goal of these stakeholders is the wealth maximization of the company so that their personal wealth can be maximized (McKinney 2015). The stakeholders will be maximizing their wealth when the wealth of the company is maximized. From the above discussion, it can be observed that Cineplex complies with some of the major accounting principles like the principles of Canadian GAAP, IFRS, AASB and others. At the same time, Cineplex also follows many other accounting principles for the valuation of their plant, property, inventories, foreign currencies and others (Grant et al. 2014). The compliance with all of these accounting policies ensures the correct accounting as well as financial reporting in the company; and this aspect help Cineplex to strengthen their financial condition. In the presence of better financial condition, the company easily gets all the required resources for the implementation of their business strategies. At the same time, the wealth of the stakeholders increase in the presence of the increased wealth of the company (Wheelen et al. 2017). Thus, it can be said that these accounting policies have major contributions towards the company.
3.The provided situation indicates towards the fact that the management of Cineplex is considering the option to become a private company and this privatization process will have a major impact on the process of financial reporting of the company. After converting in a private company, Cineplex will be needed to comply with the accounting standards of Accounting Standards of Private Enterprises (ASPE). ASPE was introduced in the year of 2011 and there is not many differences between ASPE and IFRS. ASPE provides the private companies with simple financial reporting options and this aspect makes it the best choice for the Canadian public companies (Hope, Thomas and Vyas 2013). Under ASPE, ASPE will have to comply with the principle of Section 1000 for capital maintenance without prescribing anything. After that, ASPE needs to comply with Section 1100 Generally Accepted Accounting Principles for the preparation of financial statements. The adoption of Section 1505 of ASPE will help the company in disclosing all the required accounting policies of the business. For showing any kind of accounting changes, ASPE is needed to comply with ASPE Section 1506. Apart from this, there are many other accounting policies under ASPE that ASPE is needed to consider (cpacanada.ca 2018).
Aircanada.com. (2018). [online] Available at: [Accessed 26 Jul. 2018].
Cpacanada.ca. (2018). Summary comparison of ASPE and IFRS. [online] Available at: [Accessed 26 Jul. 2018].
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