Kelly’s Shoes Limited used to be a major store in Canada before it went bankrupt and was bought by Bears Shoes Limited. Many of the stores were anchor tenants in medium- to large-sized retail shopping malls. This space was primarily leased under non-cancellable real estate leases as disclosed in note 16 to the consolidated financial statements. Aggregate commitments under both capital and operating leases amounted to over $1.3 million. As part of Kelly’s restructuring and downsizing plans prior to its bankruptcy, the company announced at the beginning of the year that it planned to close down 31 of its 85 stores by June 30. Subsequently, it announced that it might keep certain stores open until February in the following year if the landlords were prepared to provide an appropriate level of financial support. Kelly’s also announced that landlords who allowed the stores to close June 30 (the earlier date) would be given a bonus of three months of rent.
Assume the role of Kelly’s management and discuss the financial reporting issues that the company had to deal with before its bankruptcy. Discuss any differences between IFRS and ASPE.