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IFRS 16 Leases, MD&A Analysis, And IFRS 15 Impact On WSP Global Inc. Financial Statements

8 Pages / 1,934 Words Published On: 03-11-2020

Part I: 2017 Financial Statements and Notes

  1. In January 2016, a new Lease accounting standard (IFRS 16) was issued with an effective date of January 2019, (early adoption available).  IFRS 16 requires that lesseesreport all leases, both finance and operating (as formerly defined), on the statement of financial position (balance sheet).  The lessee company will be required to recognize a right-of-use lease asset and a lease liability equal to the present value of the lease payments (with some exceptions).  

For lessors under IFRS 16, the requirements have not substantially changed and companies will therefore apply the guidelines you studied in Intermediate Accounting for determining an operating or finance lease.

  1. Review your company’s financial statements and notes with the 2017 statements. Does your company discuss IFRS 16?

Does your company have leases as a lessee, a lessor, or both? How significant are operating leases to your company as either lessee or lessor (compared to other operating expenses for example)?  How easy or difficult was it to find this information and where did you find it (give reference)?

  1. Many companies primarily report operating leases due to the current accounting standards, with the concern that debt is under-reported. Financial analysts (such as Moody’s or Standard & Poor’s) make adjustments by using approximations like 6 times the annual (current year) operating lease expense in the income statement as a calculated “rule of thumb” for adjusting the balance sheet liabilities.  This estimate is then added to existing debt to provide a debt comparison to companies reporting finance leases.

Use the rule of thumb calculation (6 x operating lease expenses) to estimate the increase in debt if all operating leases were reported as finance leases this year.

If the revised section was adopted in 2017, meaning that as a lessee company, your corporation will need to report as a liability (debt) the present value of its future operating lease payments, will it significantly affect the recorded debt of your company?  Is it significant compared to other liabilities? Explain with sufficient calculations to support your explanation.

  1. In 2014, a new Revenue accounting standard IFRS 15 was issued and has a final adoption date for 2018.  Does your company discuss IFRS 15?Does your company discuss any potential impact of the change in financial statements? Do you think based on your company’s industry that the impact may or may not be significant?  Explain.
  1. Brieflyreview your corporation’s MD&A and any of the annual report other than financial statements from its 2017 year-end. It is long but I want you to read it briefly to get a sense of its contents and understandability. When applying this question, you may note that you reviewed the annual report other than financials instead of the specific MD&A based on your company’s reporting choices.  

Critique the MD&A compared against the six general disclosure principles as recommended by CPA Canada (see required reading MD&A Guidance on Preparation and Disclosure and also copied below). Ensure you are clear which of the principles you are discussing and focus on the usefulness of the information using the CPA guidelines as a framework.

The six principles in the guidance are consistent with Canadian Securities Administrators’ views about MD&A. MD&As should:

  • enable readers to view the entity through management’s eyes;
  • supplement and complement the information in the financial statements;
  • be complete, fair and balanced, and provide information that is material to the decision-making needs of users;
  • have a forward-looking orientation;
  • focus on management’s strategy for generating value over time; and
  • be understandable, relevant, and comparable.
  1. Non-GAAP (Non-IFRS) measures in the MD&A or in the annual report

http://www.osc.gov.on.ca/en/SecuritiesLaw_csa_20120217_52-306_non-gaap.htm

In the course we discussed the Ontario Securities Commission publication with respect to non-GAAP measurement.  Non-GAAP measures usually exclude some GAAP requirements in order to allow investors to recalculate ratios or statement line items. 

Give two or more examples of the non-GAAP measures that were included in the 2017 MD&A or anywhere else in the annual report.  Explain what specific items are excluded in the measure – why are these items excluded?    Why do you think your corporation provided these specific non-GAAP measures?  As an accountant, do you have any concerns with corporations providing these non-GAAP measures?  Explain.  

  1. Subliminal Messaging in the MD&A or in the annual report

In class we discussed the article “Voluntary disclosures in corporate annual reports – More than meets the eye”. The article discussed the use of metaphors or photographs to imply a certain perspective in a company and perhaps to influence the reader’s opinion of the company.  

Give an example of a message that your corporation may be sending in its MD&A or in the annual report through the use of photographs, colour usage, metaphors or other examples.  Why do you think the corporation made that choice?  What message do you think the corporation is trying to send the readers? 

Remember that if there are no photographs or colour choices, likely there are some distinct wording choices so look for those.

If colour choices or metaphors are not apparent in the annual report why do you think that company made that choice?  What message do you think the corporation is trying to send to the users?

  1. Since the time of the release of the 2017 financial statements to now, brieflyreview the information that has been released by your company and review what has happened to your company’s stock price.  You may want to use Googlefinance, Globeinvestor, or other relevant stock websites.  What are your key findings?  
  1. As specified by the finance underpinnings of accounting, investors are interested in the beta risk of the company.  From your review of the company’s notes as well as its stock performance, do you think your company has a high or low beta risk? Investor sites will often provide a specific beta calculation for the company. Explain or interpret the beta.  
  1. In your review of the subsequent information as well as the 2017 MD&A, annual report and financial statements, did you identify any signals by your company (other than as discussed in Part 1 above)?  If so, give an example and explain why you think it is a signal.  If not, explain why you think your company chose not to signal.  
  1. Investors want to be able to use financial statements to predict future performance. Do you think the financial statements from the 2017 annual report used in assignment #1 would have helped investors in predicting the financial and stock performance that occurred subsequently?  Explain.  
  1. Now that you have reviewed the financial statements and notes, as well as the MD&A, for 2017, as an unbiased evaluation, which would you prefer as a use as investor for assessing the company – the annual report including the MD&A section or the statements and notes only without the MD&A and discussion?Explain your view.  
  1. Lastly, the investor that you have been helping in assignment #1 and #2 has asked you whether you think the current share price for the company is a buy, sell, or hold.  What would you recommend and why? 
  2. Did the MD&A influence a change in your decision as compared to your assessment of the financial statements alone?
Cite This Work

To export a reference to this article please select a referencing stye below:

My Assignment Help. (2020). IFRS 16 Leases, MD&A Analysis, And IFRS 15 Impact On WSP Global Inc. Financial Statements. Retrieved from https://myassignmenthelp.com/free-samples/busn8181-financial-reporting-and-analysis/financial-analysis-of-wsp-global-inc.html.

"IFRS 16 Leases, MD&A Analysis, And IFRS 15 Impact On WSP Global Inc. Financial Statements." My Assignment Help, 2020, https://myassignmenthelp.com/free-samples/busn8181-financial-reporting-and-analysis/financial-analysis-of-wsp-global-inc.html.

My Assignment Help (2020) IFRS 16 Leases, MD&A Analysis, And IFRS 15 Impact On WSP Global Inc. Financial Statements [Online]. Available from: https://myassignmenthelp.com/free-samples/busn8181-financial-reporting-and-analysis/financial-analysis-of-wsp-global-inc.html
[Accessed 03 October 2023].

My Assignment Help. 'IFRS 16 Leases, MD&A Analysis, And IFRS 15 Impact On WSP Global Inc. Financial Statements' (My Assignment Help, 2020) <https://myassignmenthelp.com/free-samples/busn8181-financial-reporting-and-analysis/financial-analysis-of-wsp-global-inc.html> accessed 03 October 2023.

My Assignment Help. IFRS 16 Leases, MD&A Analysis, And IFRS 15 Impact On WSP Global Inc. Financial Statements [Internet]. My Assignment Help. 2020 [cited 03 October 2023]. Available from: https://myassignmenthelp.com/free-samples/busn8181-financial-reporting-and-analysis/financial-analysis-of-wsp-global-inc.html.


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