IFRS within the Multi‐GAAP Canadian Reality: A Teaching and Learning Imperative for Intermediate Financial Accounting

Intermediate accounting instructors need to be engaged in the specific complexities and challenges of the new international financial reporting standards (IFRS) reality within the Canadian multi‐GAAP environment. Intermediate accounting courses are directly affected because they represent substantive coverage of the corporate reporting environment. In this article I make the case that these courses should primarily reflect IFRS standards in order to entrench IFRS competencies in students who wish to pursue a professional designation, to prepare students for the global environment, and to concentrate IFRS expertise issues in a robust instructor group. The competency maps of each of the three Canadian professional accounting bodies clearly reflect IFRS. Students can analyze the implications of major areas of policy differences between IFRS and private enterprise GAAP (PEGAAP) through specific targeted course coverage, but also through active learning elements, particularly research elements. This commentary reflects some of the active debate occurring regarding postsecondary curriculum as Canada adapts to IFRS and PEGAAP, and encourages action.     

A Proposal for Teaching Introductory and Intermediate Accounting in an Environment of International Financial Reporting Standards and Generally Accepted Accounting Principles for Private Enterprises*

Teaching introductory and intermediate financial accounting in an environment of international financial reporting standards (IFRS) and generally accepted accounting principles for private enterprises (GAAP for PEs) is an issue facing faculty at Canadian universities and colleges. We present a number of options and then propose an approach that we believe provides a balanced treatment of accounting standards for both publicly accountable and private enterprises. This approach focuses on the concepts and principles that are common to both IFRS and GAAP for PEs. We argue that this approach encourages deep learning resulting in students’ better understanding of accounting standards and their application.     

The Use of Management Accounting Techniques by Small and Medium‐Sized Enterprises: A Field Study of Canadian and Australian Practice

Small and medium‐sized enterprises (SMEs) represent a large and important part of developed economies. However, little is known about the extent to which SMEs use contemporary management accounting (MA) techniques such as costing systems, budgets, responsibility center reporting, and analysis for decision making. To address this gap in the literature, we conducted in‐depth field interviews at 22 SMEs to: (1) determine the extent to which common MA techniques and tools are being used by SMEs; and (2) explore the underlying reasons why specific MA techniques are not being used. We find that of the 19 common MA techniques covered in our interviews, a very small number are moderately or highly used by our respondent companies. Moreover, we find that manufacturing companies in our study are more likely to use a broader set of techniques such as costing systems, operating budgets, and variance analysis and that smaller, early‐stage SMEs are the lightest users of MA tools overall. We identify three main factors affecting the adoption and use of MA techniques: (1) the perceived decision‐usefulness of the technique; (2) the complexity of the SMEs’ operating environment; and (3) the age of the SME. We discuss the contributions of our study and its potential implications for MA educators, developers of professional education programs, designers of SME control systems, and textbook authors.     

A Conceptual Framework for Learning Management Accounting

This paper demonstrates how Schoenfeld's ( 1985 ) conceptual framework for mathematics can provide an alternate framework for learning and thereby teaching management accounting. The four‐part framework—heuristics, resources, beliefs, and controls—is a refinement to problem‐based learning with three attributes in regard to management accounting. First, all aspects for teaching management accounting are integrated into a single framework or theory. Consistency among all parts of management accounting clarifies student and instructor roles in the learning process. Second, the framework's problem‐solving focus with linkages to explanatory materials or resources allows students to be rigorously informed about the functionality of management accounting heuristics. Third, transition or extension of relatively simple, standard problems to more complex nonstandard problems or cases is facilitated by introducing appropriate beliefs and controls. In effect, this approach enables management accounting, and particularly case analysis, to be taught with more structure.     

Modeling Accounting Workplace Interactions with Text‐to‐Video Animation

This article describes a new pedagogical tool, text‐to‐video animation software, that accounting instructors can adopt to easily generate quality videos that address a variety of accounting learning objectives. Although this tool can be used to enhance traditional pedagogical methods, such as case analysis and discussion, it can also be used to address accounting learning objectives not currently addressed by traditional pedagogical methods. This article outlines the benefits of adopting and using this tool in financial and managerial accounting courses, and encourages further study of its effectiveness.     

Sustainability Northwest: An Integrative Case of a Not‐for‐Profit Organization

Sustainability Northwest (SNW) is a fictional not‐for‐profit organization (NPO) that seeks to develop thought leaders for a sustainable future. This instructional case allows professors to assign students with up to six different roles, including SNW's chair of the board, executive director, volunteer treasurer, and the external auditor. Unique learning objectives include (i) the application of the CPA Canada Handbook, Accounting—Part III to prepare an NPO's financial statements using fund accounting, (ii) the development of recommendations to improve an NPO's board of directors, (iii) the analysis of system flow documents to identify control weaknesses, and (iv) the preparation of an audit planning memo. Instructors can use this case in several milieus. First, professors can foster a student's ability to integrate technical knowledge by (i) assigning students all six roles in a capstone course to promote integration within an individual course or (ii) assigning multiple roles across multiple courses to promote integration across a program of studies. Second, instructors can focus on a particular technical skill by assigning specific roles. This case is ideal for senior‐level undergraduate students or graduate students.     

Warning Lights on the Dashboard

Many businesses operate legally while pushing the ethical values of society. This case follows the actions of a manager who uses particular metrics to improve his business at the cost of increasing the community's ethical concerns. The objectives of the case are to have students recognize ethical concerns arising from the metrics, assess how these impact business strategy, propose improvements while understanding the ethically sensitive environment in which the business operates, and devise an effective approach to persuade others to implement proposed changes. This case demonstrates to students the complexity of many ethical issues in business and challenges them to consider the interaction between ethical boundaries and a profitable corporate strategy. It highlights the importance of ensuring that both qualitative—here, ethical—and quantitative considerations are incorporated in any management accounting decision‐making tool.     

Diffusion of Management Accounting Practices in Gulf Cooperation Council Countries*

This study examines how management accounting practices (MAPs) have been adopted and diffused by publicly listed firms in the Gulf Cooperation Council (GCC) countries. The results of our survey show that the adoption rates for MAPs in the area of cost management and strategy are low while those in the area of performance measurement are moderate. Overall, the respondents favorably perceived their success in implementing MAPs. Power and politics, not economic (or cost–benefit) reasons, were considered to be the most influential reasons for nonadoption of MAPs. The results provide partial support to the view that there is a global convergence of management accounting system designs and ideas and also indicate that the role of cultural differences is diminishing over time.     

The Effect of Reversibility on a Manager's Decision to Record Asset Impairments

Over time, accounting standards have moved toward presenting more items at fair value on the balance sheet. Consistent with this trend, IAS No. 36 permits an impairment loss on a long‐lived asset to be reversed if the economic value of the asset recovers. This article uses empirical data from an experiment conducted with 118 managers to explore the implication of allowing impairment reversals on a manager's decision to record the loss. Results suggest that permitting reversals significantly increases the likelihood that a manager will record the impairment, especially if the manager has a bonus plan. The bonus plan effect is not caused by the manager's intention to smooth income through impairment reversals, but by his disutility from a bonus forgone if the value of the asset recovers but accounting rules prohibit him from reversing the loss.     

Boxing and Martial Arts Company,A Tax Case

A tax case is developed examining a private Canadian sports company. This case simulates a real‐world start‐up company in the area of Canadian Controlled Private Corporation taxation. The client, Boxing and Martial Arts Co., is a medium‐sized, rapidly growing sports promotion business. It operates in an environment where cash payments are common, especially towards foreign workers. Students must research issues involving tax deductions and revenue recognition. The learning objectives include: reinforcing taxation concepts that most students learn in introductory courses (i.e., revenue recognition, allowable business expenses) as well as improving students’ tax research skills for more complex issues (e.g., international tax treaties).     

An Assessment of the Psychometric Properties of the Perceived Stress Scale‐10 (PSS10) with Business and Accounting Students

Using a sample of 557 undergraduate business students from three U.S. comprehensive universities, this study examined: (a) the factor structure of the Perceived Stress Scale‐10 (PSS10; Cohen and Williamson, 1988); (b) the invariance of its factor structure; (c) the scale's reliability; and (d) its convergent and divergent validity. Confirmatory factor analyses supported a structure with two primary factors, General Distress and Ability‐to‐Cope, loading on a single second‐order factor, Perceived Stress. Furthermore, this model was confirmed for designated subpopulations including the 264 accounting majors who participated in the study. Notably absent in prior research, this study found two items, numbers 2 and 9, to load significantly on both the General Distress and Ability‐to‐Cope factors with men and the full sample, respectively. Item–total correlations, coefficient alphas, and Spearman‐Brown reliability coefficients supported the reliability of the items loading on the full scale as well as on each of the two primary factors. Combined, these findings provide compelling evidence in support of the PSS10 as a stress assessment measure for business students in general, and accounting students in particular. In fact, given its practical expediency in terms of administration and scoring, the PSS10 appears to be a tool that could be used by university administrators and potentially by human resource personnel at accounting and business organizations to assess student/employee perceived stress levels before the onset of burnout tendencies, thus facilitating more timely and cost‐effective intervention strategies.     

Fair Value Accounting and Stewardship*

Current standards define fair value as the market price at which an asset could be sold or a liability could be settled in the normal course of business. Setting aside measurement issues, assessing the relevance of exit values has intensified in recent years as fair value becomes a pervasive component of accounting regulation. The current debate about accounting measurement is framed in terms of making a choice between fair value and historical cost. In this article I argue that this is not a correct framing of the issues; knowledge of fair value alone cannot help investors to evaluate stewardship, because they would not know how much resources the management had sacrificed to obtain that fair value. To properly evaluate stewardship, investors need both types of information, historical cost and fair value.Using this information, a rate‐of‐return‐like index of stewardship quality is proposed. This commentary concludes with a statement about three significant drawbacks of relying solely on fair value accounting.     

Barbados Spirits Inc.

This case focuses on the audit of a subsidiary in Barbados of a Multi‐National Entity (“MNE”), a distiller in Toronto. The MNE is a large and important international client to the accounting firm. The firm provides both tax advisory and audit services to the MNE. The MNE, following advice of the accounting firm, has utilized an offshore related party to structure transactions that avoid taxes in Barbados. These related party transactions are a detriment to the interests of critical users of the financial statements, namely the minority shareholders and the tax authorities of Barbados. The auditor is now faced with evaluating the adequacy of the related party note disclosure and the completeness of the income tax provision. Independence issues of a self‐interest threat (importance of the client) and self‐review threat (evaluating the adequacy of the income tax provision based on tax advice provided by the firm) are explored.     

A Balanced Scorecard for Maple Leaf Consulting

Maple Leaf Consulting is the disguised name for an actual medium‐sized international engineering and environmental consulting firm. In its 35 years of operations, the firm has grown from a single 10‐person office in Canada to more than 3,000 employees worldwide. Despite the growth from providing only specialized geotechnical engineering to many related technical specializations, the firm retained its nonbureaucratic orientation. Now, while emphasizing innovative world‐class technical knowledge, the fictional firm must resolve a series of organizational transition issues, which the actual firm did through the use of the balanced scorecard. The purpose of this case is for students to develop a preliminary balanced scorecard with appropriate measures.     

Bach Music Inc.: Impact of Price Pressure,Capacity Constraints,and a Special Order on Management Decision Making

This case has been developed for an introductory management accounting course at the undergraduate and MBA levels. Although the setting is relatively simple, it illustrates several management accounting issues that are relevant to firms of every size that produce a product or service under competitive pressures and capacity constraints. The case also integrates several topics that are often viewed as abstract by the students. Specifically, it deals with the concepts around cost‐volume profit analysis in a realistic environment, the tension between short‐term and long‐term decisions, discounted cash flow analysis, the impact of managerial incentives and compensation on decision making and the impact of operating leverage on profitability. The case was used successfully several times in an introductory course at the MBA level. Surveys of the students reveal that the case has contributed significantly to their learning and has clarified the concepts introduced in the case.     

Viasystems Group,inc.

Viasystems Group, Inc. (Viasystems) is an international supplier of electromechanical assemblies and components. It specializes in manufacturing printed circuits and assembling electric cables and industrial metal cabinets. The case concerns the Printed Circuit Division at Viasystems and its need to adapt its costing system to the relocation of its manufacturing activities to China under its strategic planning, begun in 2001. Planning and controlling operating costs and the presentation of the financial statements have therefore become major issues. The case is set in 2006, six years after the start of progressive offshoring of manufacturing to China. It describes: 1) how external environmental pressures and the need for profitability have led to a critical strategic decision; and 2) how this new business model has changed upper management's informational needs, leading them to rethink their costing system, particularly at the Chinese plants. Setting the case in 2006, when all the plants have been relocated to China, enables discussions of the challenges that management will have to cope with in the future, after the operations transfer has been completed and the consequences on the management control system.     

Condominium Townhouse Investment

This accounting case involves the evaluation of various alternatives based on a real‐life personal property investment. The Condominium Townhouse Investment (CTI) case uses introductory management accounting concepts and analyses to introduce students to the case method of learning. The main concepts reinforced are relevant costs and revenues, including differentiating between opportunity and sunk costs. Students are not only asked to define and identify these items, but to consider choices centered on the decision alternatives in their role as accountants in public practice. This case is especially valuable because it offers students the chance to become engaged in an analysis and decision‐making situation that they can relate to both personally and professionally because, one day, they themselves are likely to become involved in a home ownership decision. The case focuses on real estate as a personal business investment, and requires both qualitative and quantitative analysis, with more emphasis on the qualitative aspect. In addition, the teaching notes include methods and strategies for students to use in an introductory managerial accounting class or level‐1 MBA class.     

From Plagiarism‐Plagued to Plagiarism‐Proof: Using Anonymized Case Assignments in Intermediate Accounting

Plagiarism in accounting case assignments is a serious problem that undercuts the important objectives the case assignments are used to achieve: the development of students’ critical thinking skills and the advancement of their written communication skills. This paper examines plagiarism behavior through the lens of fraud theory by targeting two elements of the fraud triangle: rationalization and opportunity. Efforts to target rationalization by changing student perceptions of peer behavior were not effective. This led to a shift in focus to the assignment itself which was providing the opportunity for misconduct. Students were sidestepping authentic engagement in the assignment by gaining access to published solutions or peer submissions from previous semesters. One failsafe design response to this problem is to use only originally written cases. However, writing a large number of original cases each semester is unrealistic within many instructors’ workloads. This article instead proposes the use of a case refreshing strategy that makes cases appear unique to each group of students. When this strategy was introduced in an intermediate accounting course, there was a dramatic decrease in plagiarism and a corresponding improvement of the academic integrity environment in the course.     

Applying the Principles of Soccer Training to the Design and Delivery of Classes in Introductory Accounting Courses

Accounting instructors face numerous challenges in structuring and teaching accounting classes. This paper describes the experience of redesigning classes in an introductory accounting course to follow the format of team training sessions in the sport of soccer. The soccer format includes six sections: warm‐up, balance/agility/coordination, skill/technique, simplified small game, game, and cooldown. We explain how the activities in each of these sections can be translated into parts of a class session. While adopting this format requires instructors to invest time in preparation and to be flexible and responsive when facilitating classes, informal results indicate that this class format is rewarding for both instructor and students and that it enhances student performance and experience. We suggest that elements of this class format could be successfully adopted for courses in other business subjects, and in nonbusiness disciplines.     

Paper and Hill: An In‐Class Corporate Governance Case

Corporate governance is a set of rules and processes that help ensure that firms are effectively run for the benefit of their stakeholders. Good corporate governance is predicated on having directors fulfill their fiduciary duties while acting as stewards of the corporation. The fact that good corporate governance is essential to a well‐functioning and prosperous society is reflected in CPA Canada's Strategy and Governance competency. Unfortunately, there are few in‐class Canadian corporate governance cases that instructors can use to help accounting students improve their understanding of these three fundamental governance concepts: director duty of care, director duty of loyalty, and the business judgment rule. This Canadian corporate governance case is based on the actual events regarding the approval of Steven Hill's employment contract as the Chair of Paper Enterprises Inc. The case is presented using PowerPoint slides, rather than in a traditional narrative format, as it intended to be used as an in‐class case that does not require advance student preparation.