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Financial Accounting
Tools for Business Decision-Making
Eighth Canadian Edition
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Financial Accounting
Tools for Business Decision-Making
Eighth Canadian Edition
PAUL D. KIMMEL PH.D., CPA
University of Wisconsin—Madison, Wisconsin
JERRY J. WEYGANDT PH.D., CPA
University of Wisconsin—Madison, Wisconsin
DONALD E. KIESO PH.D., CPA
Northern Illinois University—DeKalb, Illinois
BARBARA TRENHOLM FCPA, FCA, ICD.D
University of New Brunswick—Fredericton, New Brunswick
WAYNE IRVINE FCPA, FCA, CFA
University of Calgary—Calgary, Alberta
CHRISTOPHER D. BURNLEY FCPA, FCA
Vancouver Island University—Nanaimo, British Columbia
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DEDICATED TO
our students—past, present, and future.
DIRECTOR, BUSINESS, ACCOUNTING, AND FINANCE Michael McDonald
EXECUTIVE EDITOR Zoë Craig
ASSOCIATE INSTRUCTIONAL DESIGNER Daleara Hirjikaka
INSTRUCTIONAL DESIGN LEAD Karen Staudinger
MARKETING MANAGER Christina Koop
SENIOR CONTENT MANAGER Dorothy Sinclair
SENIOR COURSE PRODUCTION OPERATIONS SPECIALIST Valerie A. Vargas
DESIGN Wiley
COVER DESIGN Joanna Vieira/Wiley
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ISBN (E-Pub) 9781119594543
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About the Authors
BARBARA TRENHOLM, FCPA, FCA, ICD.D, is a pro- WAYNE IRVINE, FCPA, FCA, CFA, teaches accounting
fessor emerita at the University of New Brunswick, for which at the Haskayne School of Business, University of Calgary for
she continues to teach on a part-time basis. Her teaching and undergraduates and students enrolled in executive MBA and
educational leadership has been widely recognized with nu- executive education programs. Prior to his full-time academic
merous local, national, and international teaching awards. career, Wayne worked for 12 years at Price Waterhouse in the
She also served a three-year term as a Teaching Scholar at the audit group and as a senior audit manager and coordinated
University of New Brunswick. the Calgary office’s continuing education program.
Barbara is a member of the boards of Plaza REIT, NB Wayne has over 28 years of teaching experience with
Power, and the International Development Research Centre. several professional accounting programs, most recently as a
She is a past board member of Atomic Energy of Canada Lim- session leader for CPA Western School of Business in its Pro-
ited, the Canadian Institute of Chartered Accountants (now fessional Education Program.
known as CPA Canada), and the Atlantic School of Chartered Wayne has, in addition to other publishing projects,
Accountancy (now known as CPA Atlantic School of Busi- authored several case exams for CPA legacy programs and
ness), and past president of the New Brunswick Institute of published a case in Accounting Perspectives.
Chartered Accountants (now known as CPA New Brunswick). Wayne is a four-time recipient of the University of Cal-
She has extensive service as chair and a member of a wide gary’s Students’ Union Teaching Excellence Award. He has also
range of committees at the provincial, national, and interna- received over a dozen other teaching and service awards from
tional levels of the accounting profession. In addition to her other student organizations and from the CPA profession.
involvement with her profession, she has also served in lead-
ership roles at the university and in the community.
She has presented at many conferences and published
widely in the field of accounting education and standard set-
ting in journals, including Accounting Horizons, Journal of the
Academy of Business Education, CAmagazine, CGA Magazine,
and CMA Magazine. She is also part of the Canadian author
team of Weygandt, Kieso, Kimmel, Trenholm, Warren, and
Novak, Accounting Principles, published by John Wiley & Sons
Canada, Ltd.
vii
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viii ABOUT THE AUTHORS
CHRIS BURNLEY, FCPA, FCA, is a professor in the ac- PAUL D. KIMMEL, PH.D., CPA, received his bachelor’s
counting department at Vancouver Island University. Prior degree from the University of Minnesota and his doctorate
to his full-time academic career, Chris worked for 12 years in accounting from the University of Wisconsin. He taught
in public practice and also audited government departments at U.W.—Milwaukee for over 25 years and now teaches at
and United Nations agencies with the Office of the Auditor U.W.—Madison. He has public accounting experience with
General of Canada. Chris also teaches in the CPA Professional Deloitte & Touche (Minneapolis). He was the recipient of the
Education Program for the CPA Western School of Business. UWM School of Business Advisory Council Teaching Award,
Chris also teaches in the Master of Professional Account- the Reggie Taite Excellence in Teaching Award, and a three-
ing Program at the University of Saskatchewan, where he is a time winner of the Outstanding Teaching Assistant Award at
two-time recipient of the Chartered Professional Accountants the University of Wisconsin. He is also a recipient of the Elijah
of Alberta teaching excellence award. He is active interna- Watts Sells Award for Honorary Distinction for his results on
tionally, teaching and delivering guest lectures at Vancouver the CPA exam. He is a member of the American Accounting
Island University’s partner institutions in Europe, Asia, and Association and the Institute of Management Accountants
the South Pacific. Chris has been awarded numerous internal and has published articles in Accounting Review, Accounting
and external grants in support of his academic work and has Horizons, Advances in Management Accounting, Managerial
presented at national conferences. Chris has been awarded Finance, Issues in Accounting Education, and Journal of Ac-
a number of prizes by the Canadian Academic Accounting counting Education, as well as other journals. His research
Association as a result of his academic work, including awards interests include accounting for financial instruments and
for case authoring and developing innovative ideas in account- innovation in accounting education. He has published papers
ing education. and given numerous talks on incorporating critical thinking
Chris is active in the accounting profession, serving on into accounting education and he has helped prepare a cata-
the boards of the Canadian Academic Accounting Associa- logue of critical thinking resources for the Federated Schools
tion and the Chartered Professional Accountants of British of Accountancy.
Columbia (CPABC). He is past chair of CPABC’s Education
Foundation. He received the Ritchie W. McCloy Award for CA
Volunteerism. Chris is also the author of the textbook Under-
standing Financial Accounting, published by John Wiley &
Sons Canada, Ltd.
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ABOUT THE AUTHORS ix
JERRY J. WEYGANDT, PH.D., CPA, is the Arthur Ander- DONALD E. KIESO, PH.D., CPA, received his bachelor’s
sen Alumni Emeritus Professor of Accounting at the Univer- degree from Aurora University and his doctorate in account-
sity of Wisconsin—Madison. He holds a Ph.D. in accounting ing from the University of Illinois. He has served as chair-
from the University of Illinois. Articles by Professor Weygandt man of the Department of Accountancy and is currently the
have appeared in Accounting Review, Journal of Accounting KPMG Emeritus Professor of Accounting at Northern Illi-
Research, Accounting Horizons, Journal of Accountancy, and nois University (NIU). He has public accounting experience
other academic and professional journals. Professor Wey- with Price Waterhouse & Co. and Arthur Andersen & Co.
gandt is author of other accounting and financial reporting and research experience with the Research Division of the
books and is a member of the American Accounting Associa- American Institute of Certified Public Accountants. He is a
tion, the American Institute of Certified Public Accountants, recipient of NIU’s Teaching Excellence Award and four Gold-
and the Wisconsin Society of Certified Public Accountants. en Apple Teaching Awards. Professor Kieso is a member of the
He has served on numerous committees of the American Ac- American Accounting Association, the American Institute of
counting Association and as a member of the editorial board Certified Public Accountants, and the Illinois CPA Society.
of Accounting Review; he has also served as President and Sec- He has served as a member of the Board of Directors of the
retary-Treasurer of the American Accounting Association. Illinois CPA Society, the AACSB’s Accounting Accreditation
In addition, he has been actively involved with the Amer- Committees, and the State of Illinois Comptroller’s Commis-
ican Institute of Certified Public Accountants and has been a sion; as Secretary-Treasurer of the Federation of Schools of
member of the Accounting Standards Executive Committee of Accountancy; and as Secretary-Treasurer of the American
that organization. He served on the FASB task force that exam- Accounting Association. Professor Kieso is currently serving
ined the reporting issues related to accounting for income on the Board of Trustees and Executive Committee of Aurora
taxes and as a trustee of the Financial Accounting Founda- University, and he is a member of various other boards. From
tion. Professor Weygandt has received the Chancellor’s Award 1989 to 1993, he served as a charter member of the national
for Excellence in Teaching and the Beta Gamma Sigma Dean’s Accounting Education Change Commission. He is the recipi-
Teaching Award. He is on the board of directors of M&I Bank ent of the Outstanding Accounting Educator Award from the
of Southern Wisconsin. He is the recipient of the Wisconsin Illinois CPA Society, the FSA’s Joseph A. Silvoso Award of
Institute of CPAs’ Outstanding Educator’s Award and the Life- Merit, the NIU Foundation’s Humanitarian Award for Service
time Achievement Award. In 2001, he received the American to Higher Education, the Distinguished Service Award from
Accounting Association’s Outstanding Accounting Educator the Illinois CPA Society, and an honorary doctorate from Au-
Award. rora University in 2003.
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What’s New?
Helping Students Learn Accounting Concepts
We have carefully scrutinized all chapter material to find new blended loan payments, bond pricing, and market measures, in
ways to engage students and help them learn accounting con- addition to other topics. We highlighted accounting concepts
cepts. An additional 11 DO IT! exercises have been developed, that are useful for management decision-making throughout
meaning that there are now 99 in-chapter opportunities for the text. We included a summary of Decision Tools in each
students to test their understanding before moving on to the chapter as well as a practice exercise and solution, Using the
next topic. Some of the new DO IT! exercises help students Decision Tools. As well, we added and/or revised a significant
confirm their understanding of the five-step model of revenue number of explanations, examples and illustrations through-
recognition. Other new DO IT! exercises have been created for out the text to better facilitate student learning.
Real-World Context
One of the goals of the financial accounting course is to orient companies have been included throughout the textbook in a
students to the application of accounting principles and tech- variety of ways—in simplified financial statements in the chap-
niques in practice. Accordingly, we have expanded our practice ter material, ratio analyses, Using the Decision Toolkit, end-of-
of using current examples from real companies throughout the chapter cases, and financial statements in Appendices A and
textbook by adding even more high-interest companies such as B at the end of the textbook. Other features that were updated
Uber, Live Nation, Aritzia, True Büch Kombucha, and Apple. include Keeping an Eye on Cash, which explains the signifi-
We hope that these will increase student engagement. This edi- cance of cash, and the Missing in Action features, which show
tion includes more than 300 references to real-world companies how a missing control can result in errors and misstatements. In
of interest to students. Half of the chapter-opening feature sto- addition, our author team is active in delivering the CPA Profes-
ries were replaced with new stories, while the remainder were sional Education Program and incorporated this real-world per-
updated. Accounting Matters insight boxes that feature real spective when writing each chapter, including the end-of-chap-
companies were also updated. The feature companies for this ter material. International Financial Reporting Standards (IFRS)
edition are The North West Company and Sobeys, two well- and Accounting Standards for Private Enterprises (ASPE) were
known companies in the grocery industry. References to these also revised to reflect current and pending changes to standards.
New IFRS Content
Chapters 4, 5, and 8 now include significantly expanded IFRS tions. Content on variable consideration and refund liabilities
15 content related to the five-step model of revenue recognition. has also been added. These discussions are well supported with
The material has been presented in a graduated manner, expos- related DO IT! exercises. Chapter 8 has also been updated to
ing students to situations involving only a single performance reflect the expected credit loss model from IFRS 9, while lease
obligation, before moving on to multiple performance obliga- content in Chapter 9 has been updated to reflect IFRS 16.
Data Analytics
New features on data analytics, called Analytics Mindset, A new accounting-specific data analytics module
have been authored for this edition and are included in eight with interactive lessons, case studies, and videos is part of
of the chapters. These features are focused on helping students the WileyPLUS course. The module has been prepared using
develop the ability to ask the right questions and identify the in- industry-validated content to help you develop the profes-
ternal and external data that could be captured to help answer sional competencies needed for the Common Final Examina-
these questions. Related end-of-chapter material, in the form of tion (CFE) and the changing workforce.
questions and critical thinking problems, has also been created
for faculty wanting to expand the discussion of this material.
x
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WHAT’S NEW? xi
Review and Practice
The review and practice section at the end of each chapter has are comprehensive in their coverage, with detailed feedback
been refined. This area includes, in one place, an overview of provided at the end of the chapter to help students analyze
the learning objectives, key terms, differences (if any) between their results. Additional practice objective-format questions
IFRS and ASPE, and decision tools, in addition to practice op- are available in the test bank for instructor use. These ques-
portunities using the Decision Toolkit and a comprehensive tions are similar to ones that CPA Canada is introducing to the
DO IT!. The review and practice section also includes objec- Professional Education Program, providing students with an
tive-format questions that allow students to self-assess their early opportunity to learn how to approach and develop a level
understanding of the topics in each chapter. These questions of comfort with this style of question.
End-of-Chapter Material
The end-of-chapter material underwent a comprehensive up- of transactions. The serial case, which has been an important
dating to ensure that it continues to be relevant and fresh. One continuing feature in each chapter in past editions, has been
third of the questions, brief exercises, exercises, problems, and revised to follow the evolution of a hypothetical computer con-
cases in the end-of-chapter material are either new or signifi- sulting company from a small private firm to a large publicly
cantly updated. A new type of critical thinking problem has traded company. The serial case includes the application of the
been added in every chapter that requires students to think five-step revenue recognition model.
through the high-level financial statement impacts of a variety
Key Features of Each Chapter
Chapter 1: The Purpose and Use of Financial Chapter 2: A Further Look at Financial Statements
Statements • Feature story is about Aritzia, its users, and use of ac-
• Feature story is about The North West Company and how counting standards
accounting aids decision-making • Presents the classified statement of financial position and
• Identifies the users and uses of financial accounting in- the items typically found in each section
formation and forms of business organization—propri- • Explains how ratio analysis is used to analyze a compa-
etorship, partnership, private corporation, and public ny’s liquidity, solvency, and profitability
corporation
• Applies ratio analysis to two years for retailers includ-
• Describes the business activities—financing, investing, ing Aritzia, Reitmans, and their industry (working cap-
and operating activities—that affect companies ital, debt to total assets, basic earnings per share, and
• Explains the content, purpose, and interrelationships price-earnings ratios)
of each of the financial statements—income statement, • Describes the conceptual framework of accounting
statement of changes in equity, statement of financial po-
• Key changes: New feature company Aritzia. Updated
sition, and statement of cash flows
terminology to focus on fair value rather than current
• Uses financial statements of a hypothetical company (to value, as this is more applicable to introductory account-
keep it simple), followed by those for a real company, The ing coverage. Updated definitions due to changes in the
North West Company (to make it relevant) conceptual framework. Expanded references to more
• Key changes: Added context on the nature of public com- companies, including Exco Technologies Ltd., Cogeco
panies and role of shareholders. Added an illustration Communications Inc., and CGI Group Inc. Revised Prac-
highlighting the differences between forms of business. tice Using the Decision Tools to focus on Roots Corpor-
Included context on share repurchases. Added discussion ation. Introduced the concept of data analytics and big
on the alternative cash flow treatments of interest and data concepts and discussed data collection techniques in
dividend payments under IFRS. Added content related to our new Analytics Mindset feature.
the auditors’ report and notes to the financial statements.
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