Jason Corporation completed, its board of directors authorized, and it issued its financial statements following IFRS for the year ended December 31, 2017 on March 10, 2018. The following events took place in early 2018.
1. On January 30, 19,000 common shares were issued at $45 per share.
2. On March 1, Jason determined after negotiations with the Canada Revenue Agency that income tax payable for 2017 should be $1.2 million. At December 31, 2017, income tax payable was recorded at $1 million.
Instructions
(a) Discuss how these subsequent events should be reflected in the 2017 financial statements.
(b) The controller of Jason Corporation believes that the income tax payable as at December 31, 2017 should not be increased to $1.2 million, because the original estimate of $1 million was based on the information available at the time of accrual, and recorded in good faith. The controller feels that the revised estimate of $1.2 million should be treated prospectively as a change in estimate. Do you agree or disagree with the controller's proposed accounting treatment of the income tax payable as at December 31, 2017? Discuss your conclusion from the perspective of investors.
(c) Would your answers for parts (a) and (b) differ if Jason Corporation had been following ASPE?