This elective course introduces students to the accounting standards related to valuation for financial reporting, which students either practicing, interested, and/or impacted by this field must clearly understand. While the focus of the course is on Canadian standards, some discussions on United States and International standards are included due to the increasing level of integration and harmonization between Canadian, United States and International standards.
MODULE 1: Introduction to Accounting Background
Accounting and valuation standards for financial reporting are constantly changing and have become increasingly complex. This module is intended to serve as an introduction to a number of the financial reporting-related standards and guidance in existence and used in practice, as well as some of the related valuation issues that can be encountered.
Specifically, this module discusses the applicable Canadian accounting standards and the appropriate application of these requirements in valuations for financial reporting for:
While focus is primarily on Canadian standards, the discussion also includes United States and international standards due to the current and expected level of integration and harmonization between Canadian, U.S., and international standards.
The importance of keeping up-to-date with constantly changing accounting standards as they relate to valuation for financial reporting cannot be overemphasized.
MODULE 2: Purchase Price Allocation
Purchase price allocations (PPAs) and intangible asset valuations are a complex area of valuation, and becoming proficient at the process takes years of experience. This area of valuation for financial reporting continues to be a growing and very interesting aspect of business valuations. And, as the process is tied to constantly changing financial reporting and accounting rules that impact the valuation process, the valuator must keep abreast of current topics.
This module discusses some of the key aspects of the PPA process, including:
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Identifying the intangible assets;
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Assessing and selecting appropriate valuation approaches;
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Developing the valuation model; and
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Assessing the reasonableness of the results.
The final selection of the module discusses various issues relevant to the management of purchase price allocations, including engagement letters, management representation letters, report writing and interactions with the acquiring company’s auditors.
MODULE 3: Impairment
Under Canadian and U.S. generally accepted accounting principles (Canadian GAAP and U.S. GAAP), indefinite life intangible assets and goodwill are recognized at the date of their purchase and measured at fair value. Since 2002, goodwill and indefinite life intangible assets are no longer amortized under Canadian GAAP. However, these assets must be tested for impairment when triggering events occur.
This module discusses:
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The rationale behind goodwill impairment;
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CICA and U.S. accounting principles relating to goodwill impairment;
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Specific valuation issues regarding goodwill impairment; and
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Impairment of long-lived assets.
MODULE 4: Role of CBV on Audit Team (as a Specialist)
The previous modules discussed specific financial reporting standards that require fair value accounting, and the related valuation methodologies. The implementation of these standards will, in certain circumstances, require the auditors of the financial statements subject to the fair value reporting to become comfortable with the valuation methodologies and concepts employed by the company. Auditors may turn to valuation specialists to gain comfort over the methodologies and assumptions utilized.
In this module, you will gain an understanding of the potential role of a valuation specialist in an audit engagement. This module discusses:
- How the need for a valuation specialist is determined;
- The role of the valuations specialist, and the importance of independence and objectivity in financial reporting;
- The relevant accounting and regulatory standards applicable to fair value financial statement reporting, and the responsibilities of the audit team, the client and the valuation specialist; and
- Engagement management issues that should be considered when a valuation specialist is engaged as part of the audit team.
Upon completion of the notes and assigned readings for this module, you will have an opportunity to demonstrate your knowledge by completing the Case Study Activities and applying these to the comprehensive Case Study assignment that is to be submitted at the end of the course.