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WILEY
Intermediate Accounting
I I
Twelfth Canadian Edition
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
BRUCE J. McCONOMY,
JERRY J. WEYGANDT, Ph.D., CPA 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 Tim Stookesberry
DIRECTOR, BUSINESS, ACCOUNTING, AND FINANCE Michael McDonald
SENIOR EDITOR Emily Marcoux
EDITORIAL ASSISTANT Kirsten Loose
ASSOCIATE PRODUCT DESIGNER Daleara Hirjikaka
PRODUCT DESIGN MANAGER Karen Staudinger
SENIOR MARKETING MANAGER Anita Osborne
SENIOR CONTENT MANAGER Dorothy Sinclair
PRODUCTION EDITOR Rachel Conrad
DESIGN Wiley
COVER DESIGN Joanna Vieira/Wiley
COVER PHOTOGRAPHS © 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
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Copyright© 2019 John Wiley & Sons Canada, Ltd.
All rights reserved. No part of this work covered by the copyrights herein may be reproduced, transmit
ted, or used in any form or by any means-graphic, electronic, or mechanical-without the prior written
permission of the publisher.
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subsequent editions.
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use in their courses during the next academic year. These copies are licensed and may not be sold or
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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.
v
About the Authors
Canadian Edition Canadian Financial Accounting Cases-2nd edition, Account
IRENE M. WIECEK, FCPA, FCA,isaProfessorofAccount ing Perspectives, and Journal of Accounting Case Research.
Bruce is an Associate Editor and is on the Advisory Commit
ing, Teaching Stream at the University of Toronto, where she
is cross-appointed to the Institute for Management & Inno tee of Accounting Perspectives and is on the Editorial Advisory
vation and the Joseph L. Rotman School of Management. Board of the International Journal of Accounting & Informa
She has taught financial reporting in various programs, in tion Management.
cluding the Commerce Program (Accounting Specialist) and
U.S. Edition
the CPA-accredited Master of Management & Professional
Accounting Program (MMPA). The Director of the MMPA DONALD E. KIESO, Ph.D., CPA, received his bachelor's degree
Program (previously Associate Director), she co-founded (in from Aurora University and his doctorate in accounting from
the University of Illinois. He has served as chair of the De
2004) and was Director of the CPA/Rotman Centre for Inno
vation in Accounting Education, which supported and facil partment of Accountancy and is currently the KPMG Emeri
itated innovation in accounting education until 2018. Irene tus Professor of Accountancy at Northern Illinois University.
has been involved in professional accounting education for He has public accounting experience with Price Waterhouse
over 25 years, sitting on various provincial and national pro & Co. (San Francisco and Chicago) and Arthur Andersen
& Co. (Chicago) and research experience with the Research
fessional accounting organization committees as well as de
veloping and directing the CICA IFRS Immersion Programs Division of the American Institute of Certified Public
for practising accountants. She was appointed a member Accountants (New York). He has done post-doctorate work as a
of the E&Y Academic Resource Center, where she helped Visiting Scholar at the University of California at Berkeley and
to author a new IFRS curriculum for the Americas. In the is a recipient of NIU's Teaching Excellence Award and four
area of standard setting, she has chaired the CAAA Finan Golden Apple Teaching Awards. Professor Kieso is the author
cial Reporting Exposure Draft Response Committee and is of other accounting and business books and is a member of the
currently a member of the IFRS Discussion Group (IDG). American Accounting Association, the American Institute of
Irene co-authored the IFRS Primer: International GAAP Certified Public Accountants, and the Illinois CPA Society.
Basics (Canadian and U.S. editions) and was the co-editor He is the recipient of the Outstanding Accounting Educator
and contributor for the books Leveraging Change-The New Award from the Illinois CPA Society, the FSA's Joseph A.
Pillars ofA ccounting Education and Educating Professionals: Silvoso Award of Merit, the NIU Foundation's Humanitarian
Award for Service to Higher Education, the Distinguished
Ethics and Judgment in a Changing Learning Environment.
She co-authored the Guide to IFRS in Canada series, which Service Award from the Illinois CPA Society, and in 2003
is published by CPA Canada. Irene is on the editorial board received an honorary doctorate from Aurora University.
of Accounting Perspectives.
JERRY J. WEYGANDT, Ph.D., CPA, is Arthur Andersen Alumni
BRUCE J. McCONOMY, Ph.D., CPA, CA, is a Professor Professor of Accounting at the University of Wisconsin
of Accounting and a KPMG Foundation Fellow in Accounting Madison. He holds a Ph.D. in accounting from the University of
at the Lazaridis School of Business and Economics at Wilfrid Illinois. His articles have appeared in Accounting Review, Jour
Laurier University in Waterloo, Ontario. He was a Senior nal of Accounting Research, Accounting Horizons, Journal of
Audit Manager with Deloitte before returning to Queen's Accountancy, and other academic and professional journals.
University to obtain his Ph.D. in accounting. Bruce is Director Professor Weygandt is the author of other accounting and
of the Graduate Diploma in Accounting program at Laurier financial reporting books and is a member of the American Ac
and was Director of the CPA Ontario Centre for Capital Mar counting Association, the American Institute of Certified Pub
kets and Behavioural Decision Making, and its predecessor lic Accountants, and the Wisconsin Society of Certified Public
Centre, from 2005-2018. He has been teaching intermediate Accountants. He has been actively involved with the American
financial accounting since the late 1990s in Laurier's B.B.A. Institute of Certified Public Accountants and has been a mem
and M.B.A. programs, and also teaches in Laurier's Ph.D. in ber of the Accounting Standards Executive Committee (AcSEC)
Management program. Bruce has published articles in Con of that organization. He also served on the FASB task force that
temporary Accounting Research, Journal of Accounting, Audit examined the reporting issues related to accounting for income
ing and Finance, Journal of Business, Finance and Accounting, taxes. He is the recipient of the Wisconsin Institute of CPAs'
Accounting, Auditing &Accountability Journal, Canadian Jour Outstanding Educator's Award and the Lifetime Achievement
nal of Administrative Sciences, and Accounting Perspectives. He Award. In 2001, he received the American Accounting Associ
has also published cases in Issues in Accounting Education, ation's Outstanding Accounting Educator Award.
vi
ABOUT THE AUTHORS vii
TERRY D. WARFIELD, Ph.D., is the PwC Professor in Review, Accounting Horizons, and Issues in Accounting
Accounting at the University of Wisconsin-Madison. He Education. Professor Warfield has served on the Finan
received a B.S. and M.B.A. from Indiana University and a cial Accounting Standards Committee of the American
Ph.D. in accounting from the University of Iowa. Professor Accounting Association (Chair 1995-1996) and the AAA
Warfield's area of expertise is financial reporting, and pri FASB Research Conference Committee. He currently serves
or to his academic career, he worked for five years in the on the Financial Accounting Standards Advisory Council of
banking industry. He served as the Academic Accounting the Financial Accounting Standards Board. Professor War
Fellow in the Office of the Chief Accountant at the U.S. Se field has received teaching awards at both the University of
curities and Exchange Commission in Washington, D.C., Iowa and the University of Wisconsin, and he was named
from 1995-1996. Professor Warfield's primary research · to the Teaching Academy at the University of Wisconsin in
interests concern financial accounting standards and dis 1995. Professor Warfield has developed and published sev
closure policies. He has published scholarly articles in The eral case studies based on his research for use in account
Accounting Review, Journal ofA ccounting and Economics, Re ing classes. These cases have been selected for the AICPA
search in Accounting Regulation, and Accounting Horizons, Professor-Practitioner Case Development Program and have
and he has served on the editorial boards of The Accounting been published in Issues in Accounting Education.
Preface
As we present the twelfth edition of this course, we note that over continuing to refine the conceptual framework, working on the
the years, so much has changed in the accounting profession. We principles of disclosure framework, and rethinking perform
adopted International Financial Reporting Standards (IFRS) in ance measures. So as you work your way through the material
Canada as well as Accounting Standards for Private Enterprises in this course, think about two things: foundations and reflec
(ASPE), both starting in 2011-moving us into a multiple GAAP tion. We have added some new features to help with this.
environment. In addition, we saw a merger of the three main leg
acy accounting bodies (representing Chartered Accountants, Cer
tified Management Accountants, and Certified General Account Engaging Students Digitally
ants), resulting in one unified group: the Chartered Professional
Accountants of Canada (CPA Canada). From an educational Intermediate Accounting, Twelfth Canadian Edition, is
perspective, the outcome was a new CPA Canada Competency completely integrated with WileyPLUS, featuring a suite of
Map with a broader curriculum, newly formatted professional teaching and learning resources. WileyPLUS allows you to
examinations with a changed emphasis (Common Final Exami create a personalized study plan, assess your progress along
nations), and a new roadmap for accredited programs and educa the way, and access the content and resources needed to
tional pathways into the CPA profession. master the material. WileyPLUS provides immediate insight
The body of knowledge seems to have swelled as a result into your strengths and problem areas with visual reports
of these changes. We have been striving to navigate these new that highlight what's most important for both the instructor
waters as well as thinking about how the different technical and student.
areas interrelate. As we have found out, "more" is not always Many dynamic resources are integrated into the course to
better. Our curricula seem to be ever expanding. Many of us, as help you build your knowledge and understanding, stay moti
accounting educators, feel that the more we add to the curric vated, and prepare for decision making in a real-world context.
ulum, the less students learn (and retain). So what do we do? WileyPLUS also includes Orion, an integrated adaptive prac
It is important to emphasize that students must continue to tice that helps you build proficiency and use your study time
learn the technical material (both quantitative and qualitative). most effectively. Additional features of the WileyPLUS course
This is the foundation of who we are as accountants. But stu include:
dents must also learn to think through unstructured problems,
especially given the impact of new technologies on emerging
Chapter OA ccounting Cycle Review
industries and business models. How do we get there? We all
need to clear time and space for working through messy prob This section offers you adaptive review and practice for
lems and for subsequent reflection-not an easy task when essential accounting topics necessary to master Intermedi
there is so much foundational material that needs to be learned. ate Accounting. Built to serve as a refresher of introductory
This edition reaffirms the need for foundational, techni accounting content, this chapter includes reading content,
cal knowledge but it also reaffirms the need to help students algorithmic practice, and interactive tutorials built to improve
deal with complicated problems. Part of the key to the latter your performance.
is reflection. Who uses financial statements and why? How
do accounting standards help provide useful information?
New Solution Walkthrough Lightboard Videos
Our hope is to help produce capable decision-makers who are
thoughtful and able to continue to grow and evolve even when These videos feature the authors working through more
things keep changing. We encourage students to reflect and than fifty end-of-chapter problems. In these videos, we work
to think about things a little more deeply. This can be surpris through numerous problems to help you gain a deeper under
ingly fruitful in developing insights and lasting knowledge. By standing of various technical and conceptual issues. You
continually going back to the basics of decision-making in the can watch these multiple times if needed, in order to master
accounting environment, we can start the reflection process. the material. These will help you not only to master techni
It is a good time to do this because IFRS and ASPE are, cal materials, but also to pause and think about the issues.
for the moment, fairly stable (after a flurry of new standards Many of these videos anchor and reinforce the foundations of
affecting financial instruments, measurement, revenue recog accounting. In addition to the Lightboard videos, the Wiley
nition and leases (IFRS 9, 13, 15, and 16)). Many of the larger, PLUS course also offers approximately sixty additional solu
more complex accounting topics have been studied with new tion walkthrough videos offering just-in-time homework
accounting standards produced and put in place. We are now assistance and problem-solving techniques. Questions that are
looking at how these are being implemented. We note that accompanied by videos are identified by a ~ word
the standard setters seem to be going back to basics as well, mark. ·
viii
PREFACE ix
Excel Templates and Excel Function Videos and governance, and taxation. Many of our end-of-chapter
questions have an integration aspect. For those problems that
These videos provide you with step-by-step examples of how
most directly focus on integration, we also include integration
to use Excel Functions. Excel templates are also available for
word marks so that they are easily identified. By integrating
selected end of chapter questions.
accounting knowledge with knowledge in related areas, you
will gain a deeper understanding of things. We continue with
New Module on Data Analytics our Office Hour Video feature developed for the eleventh edi
tion, focusing on integration-related topics in most chapters.
A new accounting-specific data analytics module with interac
tive lessons, case studies, and videos has been prepared using
CPA Competency Map Integration
industry-validated content to help you develop the profes
sional competencies needed for the Common Final Examina At the start of each chapter, we provide a chart linking that
tion (CFE) and the changing workforce. chapter's Learning Objectives with the related requirements
of CPA Canada's Competency Map. This information will help
those of you planning to obtain their Advanced Certificate in
New and Continuing Features
Accounting and Finance (ACAF) or write the CFE to link the
coverage of intermediate accounting topics to the CPA educa
New Practice Problems
tional requirements. We have also mapped the content against
the Competency Map and Knowledge Supplement. These
We have included a Practice Problem at the end of each chap
appear in Appendix D. In addition, the material in WileyPLUS
ter that reviews some of the key material from the chapter,
has been more comprehensively mapped.
together with the related solution. As a first step after reading
the chapter, you will find these problems a jumping-off point
to working through the end-of-chapter material. Emphasis on Business
New Examples
Each chapter has been rewritten and reformatted to provide
Books
specific examples within the chapter illustrating key con
cepts. Each example has a fact set, instructions, and a solu
tion. Highlighting the examples and structuring them in a
Cash
consistent manner means that you will be able to test your
Company Customer
knowledge and to quickly identify examples in any chap
ter. The numerous examples are easily searchable and rein
force the basics as well as covering nuances and explaining The focus of many of the feature stories that start each chapter in
reasoning. this edition is on the business models of various companies and
industries, along with accounting issues that affect them. The
first section of most chapters focuses on Understanding the
New Emphasis on Data Analytics
Business, which introduces the accounting topic in the context
With the advent of new technologies, more data are being of everyday business. Many chapters have a business trans
created and collected. How do companies use this explo actions example box. In most business transactions, you give
sion of data to make accounting and other decisions? We something up and receive something. These boxes are meant to
have highlighted the exciting developments in the growing help you understand what has been given up and what has been
field of data analytics in vignettes and in chapter topics. received in the transaction. This is tremendously helpful when
The word mark calls the reader's atten you are trying to decide how to account for a transaction or eco
tion to this new addition. These additions will allow you nomic event. We have added some new feature stories dealing
to begin to think about emerging issues and their impact with current issues relating to new technologies.
on accounting. Selected chapters include an Analytics in
Action question that allows you to apply the information Emphasis on IFRS and ASPE
derived from the analysis of "big" data to various real
Ilia mJ
life accounting scenarios. You will find the data sets and Individual IFRS and ASPE word marks call
detailed instructions accompanying these questions in your attention to items treated differently by the two sets of stand
WileyPLUS course. ards. When the IFRS and ASPE word marks appear side by
side this indicates a direct comparison between the two
approaches. Side-by-side journal entries are used to illus
Emphasis on Integration with Related Areas
trate differences in treatment between IFRS and ASPE, and
We have included integration word marks (such as U!.fl.Igj help with analytical thinking. The end-of-chapter charts that
rJmD)
and in each chapter to help identify key areas of identify the major differences between IFRS and ASPE include
integration, including integration of accounting with finance, a column with cross-references to relevant examples, illustra
law, economics, managerial accounting, auditing, strategy tions, and brief exercises that describe the differences outlined
X PREFACE
in the comparison chart. The chapter's Looking Ahead feature impact of each transaction on the company's financial position
alerts you to upcoming changes to accounting standards. and cash flows.
Emphasis on Professional and Ethical Helping You Practise
Behaviour
The end-of-chapter material is comprehensive. Brief exer
IS!M Rather than featuring ethics coverage and problem cises, exercises, and problems focus on quantitative material.
lml
material in isolation, we use an ethics word mark to highlight End-of-chapter material includes questions that pro
ethical issues as they are discussed within each chapter. This vide you with pre-populated Excel spreadsheets to help you pre
word mark also appears beside exercises, problems, or cases pare solutions. We also continued our emphasis on having you
where ethical issues must be dealt with in relation to all kinds evaluate the differences in solutions prepared using IFRS versus
of accounting situations. ASPE. Case material allows you to analyze business transac
tions and apply both IFRS and ASPE, with attention to integra
tion being provided by Integrated Case questions. Research and
Emphasis on Readability
Analysis questions allow you to explore the nature of GAAP
The readability of the material has been improved by using fewer differences and understand how different accounting standard
abbreviations, plainer language, shorter sentences, numbered setters can arrive at different solutions in terms of standards.
lists, and clearer headings. A glossary provides definitions of key A summary of the Case Primer guiding you through the
terms highlighted in all the chapters and appendices. Alterna case study method appears in Appendix E. The complete Case
tive Terminology notes within the chapter familiarize you with Primer appears in WileyPLUS and the Student Website. The
other commonly used terms. As noted earlier, we have structured Case Primer provides a framework for case analysis to help
the examples in each chapter to make them more accessible. you structure your response to case situations.
Analysis doesn't have to be just part of the cases. Our
Digging Deeper feature asks you to look more closely at the
Grounding in Accounting Research and Theory
results you obtain in the problems and exercises and to reflect.
11.t§.lij We have always emphasized concepts and princi For instance, you might be asked to comment on results or
ples, including those that span other disciplines, such as law determine how things might be different if one of the original
variables were to change.
and finance. In addition to this, the Accounting Theory
We have included end-of-chapter material that is in a for
word mark calls attention to accounting theory that underpins
mat similar to questions used in the CPA Professional Educa
much of the accounting body of knowledge, introducing you
tion program. Task-Based Simulations after Chapters 5, 9, 12,
to an accounting research perspective.
15, 17, and 23 combine material from the current chapter with
previous chapters and present it in a hands-on format. This
Real World Emphasis
allows you to become familiar with the CPA PEP format while
Real World Emphasis Because intermediate accounting is getting a sense of how the various concepts fit together.
a course in which you must understand the application of
accounting principles and techniques in practice, we strive to Currency and Accuracy
include a wide variety of real-world examples in each chapter.
Significant Change As in past editions, we have endeavoured
Real companies are highlighted in colour the first time that
to make this edition the most current and accurate available.
they are mentioned.
Where there has been a significant change in an accounting
standard or how it is applied, it has been highlighted with a Sig
Reinforcement of the Concepts
nificant Change word mark. Where change is on the horizon,
we have noted this at the end of each chapter in the Looking
Throughout each chapter, you are asked "What Do the Num
Ahead section. We are also committed to issuing brief update
bers Mean?" and are presented with discussions applying
supplements on WileyPLUSwhen new standards are issued.
accounting concepts to business contexts. This feature builds on
The following list outlines the revisions and improve
the opening feature stories in making the accounting concepts
relevant to you. Through current examples of how accounting ments made to the chapters in Volume 1.
is applied, you will be better able to relate to and understand
the material. The Underlying Concept notes in each chapter Chapter 2 Conceptual Framework Underlying
alert you to remember that the issue under discussion draws Financial Reporting
on concepts identified in Chapter 2 as part of the conceptual
• We have introduced a three-step method to help learn
framework. More emphasis has been placed on measuring fair
ers ensure both fundamental characteristics of useful
values using the IFRS 13 standard. In addition, an Analysis sec
information are present (relevance and representational
tion is present in most chapters. This section discusses the effect
faithfulness).
on the financial statements of many of the accounting choices
made by corporate management, alerting you to look behind • We have incorporated material from the new IFRS con
the numbers. Finally, the accounting equation appears in the ceptual framework as follows:
margin next to key journal entries to help you understand the • updated discussions on conservatism and prudence
