INTERMEDIATE ACCOUNTING VOLUME 1 (12th Edition) PDF

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WILEY

Intermediate Accounting I

Twelfth Canadian Edition

I

DONALD E. KIESO, Ph.D., CPA

IRENE M. WIECEK, FCPA, FCA

KPMG Peat Marwick Emeritus

Professor of Accounting, Teaching Stream

Professor of Accounting

University of Toronto

Northern Illinois University

Toronto, Ontario

DeKalb, Illinois

JERRY J. WEYGANDT, Ph.D., CPA

BRUCE J. McCONOMY, Ph.D., CPA, CA

Arthur Andersen Alumni Professor

Professor and KPMG Foundation Fellow

of Accounting

in Accounting

University of Wisconsin

Wilfrid Laurier University

Madison, Wisconsin

Waterloo, Ontario

TERRY D. WARFIELD, Ph.D. PwC Professor in Accounting University of Wisconsin Madison, Wisconsin

WILEY

VICE PRESIDENT, EDUCATION DIRECTOR, BUSINESS, ACCOUNTING, AND FINANCE SENIOR EDITOR EDITORIAL ASSISTANT ASSOCIATE PRODUCT DESIGNER PRODUCT DESIGN MANAGER SENIOR MARKETING MANAGER SENIOR CONTENT MANAGER PRODUCTION EDITOR DESIGN COVER DESIGN COVER PHOTOGRAPHS

Tim Stookesberry Michael McDonald Emily Marcoux Kirsten Loose Daleara Hirjikaka Karen Staudinger Anita Osborne Dorothy Sinclair Rachel Conrad Wiley Joanna Vieira/Wiley © Vadim Petrov/123RF

This book was set in 9.5/ 12 STIX Two Text by Aptara, Inc. Printed and bound by Quad/ Graphics. This book is printed on acid-free paper. oo Founded in 1807, John Wiley & Sons, Inc. has been a valued source of knowledge and understanding for more than 200 years, helping people around the world meet their needs and fulfill their aspirations. Our company is built on a foundation of principles that include responsibility to the communities we serve and where we live and work. In 2008, we launched a Corporate Citizenship Initiative, a global effort to address the environmental, social, economic, and ethical challenges we face in our business. Among the issues we are addressing are carbon impact, paper specifications and procurement, ethical conduct within our business and among our vendors, and community and charitable support. For more information, please visit our website: www.wiley.com/go/citizenship. Copyright © 2019 John Wiley & Sons Canada, Ltd. All rights reserved. No part of this work covered by the copyrights herein may be reproduced, transmitted, or used in any form or by any means-graphic, electronic, or mechanical-without the prior written permission of the publisher. Any request for photocopying, recording, taping, or inclusion in information storage and retrieval systems of any part of this book shall be directed to The Canadian Copyright Licensing Agency (Access Copyright). For an Access Copyright Licence, visit www.accesscopyright.ca or call toll-free, 1-800-893-5777. Care has been taken to trace ownership of copyright material contained in this text. The publishers will gladly receive any information that will enable them to rectify any erroneous reference or credit line in subsequent editions. Evaluation copies are provided to qualified academics and professionals for review purposes only, for use in their courses during the next academic year. These copies are licensed and may not be sold or transferred to a third party. Upon completion of the review period, please return the evaluation copy to Wiley. Return instructions and a free-of-charge return shipping label are available at www.wiley.com/ go/ returnlabel. If you have chosen to adopt this textbook for use in your course, please accept this book as your complimentary desk copy. Outside of the United States, please contact your local representative. ISBN 978-1-119-49633-5 (E-Pub); 978-1-119-49649-6 (LLPC) The inside back cover will contain printing identification and country of origin if omitted from this page. In addition, if the ISBN on the cover differs from the ISBN on this page, the one on the cover is correct. References to the CPA Canada Handbook-Accounting are reprinted (or adapted) with permission from Chartered Professional Accountants of Canada. All rights reserved by the copyright owner. Questions adapted from the Uniform Final Evaluation and the Financial Accounting: Assets (FA2) Exams or Financial Accounting: Liabilities & Equities (FA3) Exams are reproduced with permission from CPA Canada, Toronto, Canada. Any changes to the original material are the sole responsibility of the author (and/or publisher) and have not been reviewed or endorsed by CPA Canada. This publication and course contains copyright material of the IFRS"' Foundation in respect of which all rights are reserved. Reproduced by John Wiley & Sons Canada, Limited with the permission of the IFRS Foundation. No permission granted to third parties to reproduce or distribute. For full access to IFRS Standards and the work of the IFRS Foundation please visit http: //eifrs.ifrs.org The International Accounting Standards Board, the IFRS Foundation, the authors and the publishers do not accept responsibility for any loss caused by acting or refraining from acting in reliance on the material in this publication, whether such loss is caused by negligence or otherwise. Printed in the United States of America V10015445_110719

Dedication Dedicated to our students, who, as graduates and professional accountants, will ably lead us through the next few decades, a period which promises to be an exciting one, with technological advancements accelerating the pace of change.

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About the Authors Canadian Edition IRENE M. WIECEK, FCPA, FCA ,isaProfessorofAccounting, Teaching Stream at the University of Toronto, where she is cross-appointed to the Institute for Management & Innovation and the Joseph L. Rotman School of Management. She has taught financial reporting in various programs, including the Commerce Program (Accounting Specialist) and the CPA-accredited Master of Management & Professional Accounting Program (MMPA). The Director of the MMPA Program (previously Associate Director), she co-founded (in 2004) and was Director of the CPA/ Rotman Centre for Innovation in Accounting Education, which supported and facilitated innovation in accounting education until 2018. Irene has been involved in professional accounting education for over 25 years, sitting on various provincial and national professional accounting organization committees as well as developing and directing the CICA IFRS Immersion Programs for practising accountants. She was appointed a member of the E&Y Academic Resource Center, where she helped to author a new IFRS curriculum for the Americas. In the area of standard setting, she has chaired the CAAA Financial Reporting Exposure Draft Response Committee and is currently a member of the IFRS Discussion Group (IDG). Irene co-authored the IFRS Primer: International GAAP Basics (Canadian and U.S . editions) and was the co-editor and contributor for the books Leveraging Change-The New Pillars ofAccounting Education and Educating Professionals: Ethics and Judgment in a Changing Learning Environment. She co-authored the Guide to IFRS in Canada series, which is published by CPA Canada. Irene is on the editorial board of Accounting Perspectives.

is a Professor of Accounting and a KPMG Foundation Fellow in Accounting at the Lazaridis School of Business and Economics at Wilfrid Laurier University in Waterloo, Ontario. He was a Senior Audit Manager with Deloitte before returning to Queen's University to obtain his Ph.D. in accounting. Bruce is Director of the Graduate Diploma in Accounting program at Laurier and was Director of the CPA Ontario Centre for Capital Markets and Behavioural Decision Making, and its predecessor Centre, from 2005-2018. He has been teaching intermediate financial accounting since the late 1990s in Laurier's B.B.A. and M.B.A. programs, and also teaches in Laurier's Ph.D. in Management program. Bruce has published articles in Contemporary Accounting Research, Journal of Accounting, Auditing and Finance, Journal of Business, Finance and Accounting, Accounting, Auditing &Accountability Journal , Canadian Journal of Administrative Sciences, and Accounting Perspectives. He has also published cases in Issues in Accounting Education, BRUCE J. McCONOMY, Ph.D., CPA, CA ,

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Canadian Financial Accounting Cases-2nd edition, Accounting Perspectives, and Journal of Accounting Case Research. Bruce is an Associate Editor and is on the Advisory Committee of Accounting Perspectives and is on the Editorial Advisory Board of the International Journal of Accounting & Information Management. U.S. Edition

DONALD E. KIESO, Ph.D., CPA, received his bachelor's degree from Aurora University and his doctorate in accounting from the University of Illinois. He has served as chair of the Department of Accountancy and is currently the KPMG Emeritus Professor of Accountancy at Northern Illinois University. He has public accounting experience with Price Waterhouse & Co. (San Francisco and Chicago) and Arthur Andersen & Co. (Chicago) and research experience with the Research Division of the American Institute of Certified Public Accountants (New York). He has done post-doctorate work as a Visiting Scholar at the University of California at Berkeley and is a recipient of NIU's Teaching Excellence Award and four Golden Apple Teaching Awards. Professor Kieso is the author of other accounting and business books and is a member of the American Accounting Association, the American Institute of Certified Public Accountants, and the Illinois CPA Society. He is the recipient of the Outstanding Accounting Educator Award from the Illinois CPA Society, the FSA's Joseph A. Silvoso Award of Merit, the NIU Foundation's Humanitarian Award for Service to Higher Education, the Distinguished Service Award from the Illinois CPA Society, and in 2003 received an honorary doctorate from Aurora University. JERRY J. WEYGANDT, Ph.D., CPA , is Arthur Andersen Alumni Professor of Accounting at the University of WisconsinMadison. He holds a Ph.D. in accounting from the University of Illinois. His articles have appeared in Accounting Review, Journal of Accounting Research, Accounting Horizons, Journal of Accountancy, and other academic and professional journals. Professor Weygandt is the author of other accounting and financial reporting books and is a member of the American Accounting Association, the American Institute of Certified Public Accountants, and the Wisconsin Society of Certified Public Accountants. He has been actively involved with the American Institute of Certified Public Accountants and has been a member of the Accounting Standards Executive Committee (AcSEC) of that organization. He also served on the FASB task force that examined the reporting issues related to accounting for income taxes. He is the recipient of the Wisconsin Institute of CPAs' Outstanding Educator's Award and the Lifetime Achievement Award. In 2001, he received the American Accounting Association's Outstanding Accounting Educator Award.

ABO UT THE AUTHORS

TERRY D. WARFIELD, Ph.D. , is the PwC Professor in

Accounting at the University of Wisconsin-Madison. He received a B.S. and M.B.A. from Indiana University and a Ph.D. in accounting from the University of Iowa. Professor Warfield's area of expertise is financi al reporting, and prior to his academic career, he worked for five years in the banking industry. He served as the Academic Accounting Fellow in the Office of the Chief Accountant at the U.S. Securities and Exchange Commission in Washington, D.C., from 1995-1996. Professor Warfield's primary research · interests concern financial accounting standards and disclosure policies. He has published scholarly articles in The Accounting Review, Journal ofAccounting and Economics, Research in Accounting Regulation, and Accounting Horizons, and he has served on the editorial boards of The Accounting

vii

Review, Accounting Horizons, and Issues in Accounting Education. Professor Warfield h as served on the Financial Accounting Standards Committee of the American Accounting Association (Chair 1995-1996) and the AAAFASB Research Conference Committee. He currently serves on the Financial Accounting Standards Advisory Council of the Financial Accounting Standards Board. Professor Warfield has received teaching awards at both the University of Iowa and the University of Wisconsin, and he was named to the Teaching Academy at the University of Wisconsin in 1995. Professor Warfield h as developed and published several case studies based on his research for use in accounting classes. These cases have been selected for the AICPA Professor-Practitioner Case Development Program and have been published in Issues in Accounting Education .

Preface As we present the twelfth edition of this course, we note that over

the years, so much has changed in the accounting profession. We adopted International Financial Reporting Standards (IFRS) in Canada as well as Accounting Standards for Private Enterprises (ASPE), both starting in 2011-moving us into a multiple GAAP environment. In addition, we saw a merger of the three main legacy accounting bodies (representing Chartered Accountants, Certified Management Accountants, and Certified General Accountants), resulting in one unified group: the Chartered Professional Accountants of Canada (CPA Canada). From an educational perspective, the outcome was a new CPA Canada Competency Map with a broader curriculum, newly formatted professional examinations with a changed emphasis (Common Final Examinations), and a new roadmap for accredited programs and educational pathways into the CPA profession. The body of knowledge seems to have swelled as a result of these changes. We have been striving to navigate these new waters as well as thinking about how the different technical areas interrelate. As we have found out, "more" is not always better. Our curricula seem to be ever expanding. Many of us, as accounting educators, feel that the more we add to the curriculum, the less students learn (and retain). So what do we do? It is important to emphasize that students must continue to learn the technical material (both quantitative and qualitative). This is the foundation of who we are as accountants. But students must also learn to think through unstructured problems, especially given the impact of new technologies on emerging industries and business models. How do we get there? We all need to clear time and space for working through messy problems and for subsequent reflection-not an easy task when there is so much foundational material that needs to be learned. This edition reaffirms the need for foundational, technical knowledge but it also reaffirms the need to help students deal with complicated problems. Part of the key to the latter is reflection. Who uses financial statements and why? How do accounting standards help provide useful information? Our hope is to help produce capable decision-makers who are thoughtful and able to continue to grow and evolve even when things keep changing. We encourage students to reflect and to think about things a little more deeply. This can be surprisingly fruitful in developing insights and lasting knowledge. By continually going back to the basics of decision-making in the accounting environment, we can start the reflection process. It is a good time to do this because IFRS and ASPE are, for the moment, fairly stable (after a flurry of new standards affecting financial instruments, measurement, revenue recognition and leases (IFRS 9, 13, 15, and 16)). Many of the larger, more complex accounting topics have been studied with new accounting standards produced and put in place. We are now looking at how these are being implemented. We note that the standard setters seem to be going back to basics as well, viii

continuing to refine the conceptual framework, working on the principles of disclosure framework, and rethinking performance measures. So as you work your way through the material in this course, think about two things: foundations and reflection. We have added some new features to help with this.

Engaging Students Digitally Intermediate Accounting, Twelfth Canadian Edition, is completely integrated with WileyPLUS, featuring a suite of teaching and learning resources. WileyPLUS allows you to create a personalized study plan, assess your progress along the way, and access the content and resources needed to master the material. WileyPLUS provides immediate insight into your strengths and problem areas with visual reports that highlight what's most important for both the instructor and student. Many dynamic resources are integrated into the course to help you build your knowledge and understanding, stay motivated, and prepare for decision making in a real-world context. WileyPLUS also includes Orion, an integrated adaptive practice that helps you build proficiency and use your study time most effectively. Additional features of the WileyPLUS course include:

Chapter OAccounting Cycle Review This section offers you adaptive review and practice for essential accounting topics necessary to master Intermediate Accounting. Built to serve as a refresher of introductory accounting content, this chapter includes reading content, algorithmic practice, and interactive tutorials built to improve your performance.

New Solution Walkthrough Lightboard Videos These videos feature the authors working through more than fifty end-of-chapter problems. In these videos, we work through numerous problems to help you gain a deeper understanding of various technical and conceptual issues. You can watch these multiple times if needed, in order to master the material. These will help you not only to master technical materials, but also to pause and th...