On January 20, 2000, the Financial Post published an article by Philip Mathias entitled, "Intrawest points to accounting report for fall in stock price.€ Intrawest owns and operates Whistler Blackcomb in British Columbia, Mont Tremblant in Quebec, and a number of other resorts around the world. In addition to ski resort operations, a significant part of the company's operations involves developing real estate in and around the resorts. At the time of the article, the company was publicly traded and followed the guidance in the CICA Handbook, since IFRS did not come into effect until 2011.
The article indicated that Intrawest attributed a decline in stock price to criticisms of the firm€™s accounting by forensic accountant L.S. Rosen. The company's stock price had been as high as $25 in late December 1999, but had fallen to about $21 by the date of the news article (see chart). While there had been rumours about such a critical report for several weeks, the reporter was unable to obtain a copy. According to the reporter, when he questioned Mr. Rosen about the criticism, Rosen "declined to confirm or deny reports he publicly criticized Intrawest€™s financial reports.€
At the heart of the criticisms is the company's policy for capitalizing costs on its real estate projects. In response to the allegations, Intrawest€™s executive vice-president, Daniel Jarvis, said, €œOur statements are absolutely rock solid. They present a fair and accurate picture of where the company is and ... are very conservative.€
Specifically, the criticism seems to have focused on the company's policy to capitalize €œinterest on general and specific debt and administrative expenses€ on its resort developments. The criticisms allege that Intrawest€™s earnings would be lower had it followed more conservative accounting policies.
The company justified its accounting policy on the basis that it financed some of its resort construction with the company€™s equity while others were financed with loans. Mr. Jarvis said that "there is always a cost of funding€ regardless of where it came from. The article noted that Mr. Jarvis said Intrawest€™s practice is required by GAAP.
In the year ended June 30, 1999, the company reported profits of $51.5 million, up from $41 million in 1998.

Required:
Discuss the above article using concepts from financial accounting theory (Chapter 1) and financial reporting framework (chapter 2), and the standards for PPE accounting (this chapter).

Intrawest Closing Stock Price and Trading Volume 30 25 20 5Stock price 1,200,000 1,000,000 800,000 January 17-21, 2000 Trading volume 600,000 (left scale) (right scale) 10- 400,000 200,000 01-Oct-99 01-Nov-99 01-Dec-99 01-Jan-00 01-Feb-00 01-Mar-00 Date