Polka Dot Enterprises is a Canadian private company located in Toronto, Ontario. Their business operations consist of

Question:

Polka Dot Enterprises is a Canadian private company located in Toronto, Ontario. Their business operations consist of event planning for corporations and fundraisers. They have recently begun the necessary steps to go public in the near future. As part of this, they have hired you, CA, to help with all the requirements as part of the process of going public.
Enclosed, you have been given the latest year-end statement of ï¬nancial position (Exhibit C1-9(a)) and extracts of the Notes to the (Exhibit C1-9(b)) of Polka Dot Enterprises to review and to give your preliminary comments on. It is presently February 2014 and the Chief Financial Ofï¬cer would like to receive your comments as soon as possible so that, if necessary, any changes can be incorporated. He is particularly concerned with the accounting of their investments as he has heard that there might be some differences upon transitioning from accounting standards for private enterprises to IFRS. It is not necessary to restate the statement of ï¬nancial position, but rather simply discuss and explain any changes required and the impacts it would have on Polka Dot Enterprises. Net income for the year was $315,665.

EXHIBIT C1-9(B)
Polka Dot Enterprises
Notes the to the Financial Statements
For the Year Ended December 31, 2013
Note 1 €“ The investment in Ranger Limited was one made during 2013 to invest excess cash on hand that Polka Dot Enterprises had. The cost at the time of the 4% purchase of Ranger Limited€™s outstanding shares was $121,736. This was a short-term investment and when the cash is needed in 2014, it will be sold. As at December 31, 2013, the fair value of the investment was $156,212 and net income of Ranger
Limited for the year was $39,103.
Note 2 €“ In January 2013, Polka Dot Enterprises purchased 100% of Tulip Inc., a company engaged in a similar line of business as them.
The cost of the investment was $102,911 and its fair value as at December 31, 2013 was $147,212. In addition, due to the purchase,
Polka Dot Enterprises was allowed to appoint three of the four members to the board of directors. They have also been looking for ways to achieve synergies and to utilize each other€™s expertise. Tulip Inc.€™s net income for the year was $120,921.
Note 3 €“ The cost of the investment in Shoes Enterprise was $156,192 and was made in January 2013 to obtain 19% ownership in Shoes
Enterprise. This was done to gain access to a supplier, as prior to this Shoes Enterprise was one of Polka Dot Enterprises1 main supplier of party goods and decorations. The fair value of the investment as at December 31, 2013, was $199,267. Net income for Shoes Enterprise as
a whole since the date of investment was $137,934.
Note 4 €“ During the year, in order to expand their business into Montreal, Quebec, Polka Dot Enterprises entered into business with another entity, Marie Inc. They in turn created a new entity, Rose Limited. Each company contributed assets worth $133,901 to the new entity and they will share equally in the proï¬ts of Rose Limited. As at December 31, 2013, the fair value of Polka Dot Enterprise€™s investment was $176,924. Both Polka Dot Enterprises and Marie Inc. will be running Rose Limited on a day-to-day basis and no major decisions concerning the entity can be made without the consent of the other. Net income since the creation of Rose Limited was $201,692.
Note 5 €“ Investment income consists of the following:
Dividend income from Ranger Limited: $71,212
Dividend income from Tulip Inc.: $48,467
Dividend income from Shoes Enterprise: $24,921
Dividend income from Rose Limited: $34,539

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...