Question: On December 1 2013 Maclan Ltd estimates that at least

On December 1, 2013, Maclan Ltd. estimates that at least 5,000 units of inventory will be purchased from a company in the Netherlands during January 2014 for €500,000. The transaction is probable and the transaction is to be denominated in euros. Sales of the inventory are expected to occur in the six months following the purchase. Maclan’s functional currency is the Canadian dollar.
On December 1, 2013, Maclan enters into a forward contract to purchase €500,000 on January 31, 2014, for C$1.01. This is the date on which the inventory will have to be paid for. Spot rates and the forward rates at the January 31, 2014 settlement were as follows (dollars per euro):
(a) Prepare the journal entries to record the transaction in 2013 and 2014 assuming that Maclan:
1. Follows ASPE and uses hedge accounting.
2. Follows IFRS and has selected to use hedge accounting.
3. Follows IFRS and has not used hedge accounting.
(b) Which accounting framework and accounting policy will yield the best results for Maclan?

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