462 - Case #1 - Instructions DE

Case Analysis - As part of a group, you will analyze and provide a memo
addressing the issues in this case.

Individually, prior to completing the case analysis with your group please
complete the following:
1. Read Appendix 1 – A Generic Approach to Case Analysis from pages 16 to
19 and note the steps to case analysis.
2. Read the Case writing Guide found in moodle
3. Read the case below
Sunny Dayz Inc.(SDI) is a Canadian public company founded in 2001 that manufactures solar
panels. SDI sells solar panels to installers and distributors for resale to residential and
commercial customers. SDI’s mission is to manufacture and deliver sustainable and efficient
energy solutions to its customers.
On September 4, 2020, to gain a foothold in the solar panel installation market without the cost
of establishing a new division, SDI acquired 100% of Go Green Panels Inc. Ltd. (Go Green) for
$45 million. The Controller, Sylvia Knotsure accounted for the investment as if it was a
significant influence. SDI has never purchased 100% of a company before; therefore, she
thought it should be recorded the same way.
The book value and fair value of Go Green ’s assets and liabilities, as at September 4, 2020,
prepared by an independent appraiser, are as follows:
Carrying value (using IFRS) Fair market value

Accounts receivable $ 5,590,000 $ 5,590,000
Inventories – supplies 5,900,000 5,900,000
Machinery and equipment 29,680,000 32,040,000
Accounts payable and (8,230,000) (8,230,000)
accrued liabilities
Total $ 32,940,000 $ 35,300,000
The purchase also included Go Green ’s proprietary software to track job costing for the
installation projects and other data. The fair market value of this software is estimated to be $4.6
million. Similar job-costing software is available in the market. Although SDI could sell the
software, it was retained for SDI’s exclusive use.
As part of the acquisition, SDI retained all Go Green ’s employees, its management and
accounting systems, and all contract proposals that are with potential customers. As part of the
arrangement, Go Green ’s owners agreed not to compete in the solar panel installation market
for two years.
During November, the purchased accounts receivable were all collected, the purchased
inventory was all used, and the accounts payable were all paid. Sylvia Knotsure was unsure of
how to deal with these transactions, so she would debit or credit cash and use the investment
account to record the other side of the entry. The balance in the investment account is as
follows:
Amount paid on closing $ 45,000,000
Collection of accounts receivable (5,590,000)
Inventory supplies used and recognized in (5,900,000)
cost of sales – project sales
Payment of accounts payable 8,230,000
Balance as at December 31, 2020 $ 41,740,000
You are an employee of SMK CPA LLP, SDI’s auditors. SDI has been a client for the past 10
years. This morning, you met with Quinn Krulitski, a partner with the firm, to discuss SDI’s 2020
yearend. The partner has requested a memo to the client, explaining whether the current
accounting treatment is correct. You should utilize the research in the Handbook to support why
any change needs to be made for how it is accounted for, clearly explaining it to Sylvia so that
she knows for any future, similar purchases SDI might make. If the accounting should be
changed, the correcting journal entries should be provided.
In addition you should also summarize any considerations or adjustments that would be
required at the yearend.
4. Do your research: You must utilize the CPA Handbook for the criteria, do not
utilize paraphrased information from the text or other sources. Accessing the
CPA Handbook: You have access to the Handbook through the library, use the
following link: https://edu-knotia-ca.ezproxy.okanagan.bc.ca/
Depending upon where you access the link, you may be required to login to the
library prior to accessing the site. The login for the library is normally your
student number and family name.
o Once you are at the CPA Canada site, select CPA Canada Standards and
Guidance Collection (CPACHB), under Accounting and Assurance.
o Select Accounting from the menu on the left
o Select Part I – International Financial Reporting Standards
o Select the 2019 edition
o Select IFRS in effect as of January 1, 2020
o Locate and read the sections below:
 IFRS 3.3 – Identifying a business combination
 IFRS 3.Appendix A – Definition of Business Combination
 IFRS 3.B5 – Identifying a business combination
 IFRS 3.10 – Recognition Principle
 IFRS 3.18 – Measurement Principle
 IFRS 3.32 – Recognizing and measuring goodwill
 IFRS 3.B31-33 – Intangible assets
 IAS 38.12
5. Prepare a rough draft of an outline - After completing the above, prepare a
rough outline that you can bring to your group meeting and discuss with your
group. Working with your group, you will develop a more detailed outline for the
assigned case using the steps in the case analysis. You will have limited time, so
make sure you have done the pre-work before class.
Required (to be done in groups)
Using your outline as a guide, prepare the response to the case, answering the
questions that the controller and senior accountants have and any other issues
identified in your outline.
 The response should be in the format of a memo to the client
 In order to analyze the GAAP treatment and provide a supported opinion, the
memo should include key points from the CPA Handbook.
 Memo specifications: The Word memo should be no more than two pages,
including the financial information requested, which should be within the
memo (the suggestion is to prepare a good, concise analysis in excel then paste
it into the memo as a picture). Font size should be no smaller than Arial 12 point
with 1 inch margins. Please use a proper memo heading. You need to address
all the issues in your memo, but you must do so concisely. Anything over 2
pages will not be marked. An additional cover page with your group names is
also allowed.

462 - Case #1 - Instructions DE

Uploaded by

Copyright:

Available Formats

462 - Case #1 - Instructions DE

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

462 - Case #1 - Instructions DE

Uploaded by

Copyright:

Available Formats

Case Analysis - As part of a group, you will analyze and provide a memo

addressing the issues in this case.

Carrying value (using IFRS) Fair market value

You might also like