Question:
Pria Developments Corp. is a Canadian real estate investment and development company looking to expand internationally. For the year ended December 31, 2016, Pria Developments prepared two sets of financial statements-one in accordance with ASPE, and the other in accordance with IFRS.
Excerpts from Pria Development's
financial statements appear below and on the following pages. ASPE-Based
Financial Statements:
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Notice that the presentation of the financial statements differs somewhat, as well as some of the recorded balances. These differences arise because ASPE and IFRS rules measure certain transactions differently. However, the focus of this question is the impact on ratios of using a different set of accounting rules. Investors need to understand that if two companies in the same industry are being compared, their results could be very different depending on whether IFRS or ASPE is used in the preparation of the financial information.
Required
1. Compute the following ratios for 2016 based on Pria Developments Corp.'s financial statements prepared in accordance with ASPE. For the purpose of this exercise, assume that "cash" and "receivables and other assets" are current assets, and that "accounts payable and other liabilities," "construction financing," and "liabilities of discontinued operations" are current liabilities. Include both "interest on long-term debt" and "interest and financing costs" in your computations for part (d).
a. Current ratio
b. Acid-test ratio
c. Debt ratio
d. Rate of return on total assets
2. Compute the same ratios in Requirement 1 for 2016 based on Pria Developments Corp.'s IFRS financial statements.
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...
Transcribed Image Text:
PRIA DEVELOPMENTS CORP Consolidated Balance Sheet $ amounts in thousands) December 31 2016 December 31 2015 Assets Investment properties Development properties Long-term investments Intangible assets Goodwill Restricted cash Cash Receivables and other Currency guarantee receivable $3,310,317 360,562 40,086 110,067 $2,939,960 293,955 39,562 100,619 33,036 27,704 17,927 78,845 25,969 16,359 138,397 28,165 $4,029,922 $3,531,608 Liabilities Long-term debt Accounts payable and other liabilities Construction financing Future income taxes Intangible liabilities Liabilities of discontinued operations Derivative instrument liability $2,952,124 268,796 102,433 129,097 15,429 28,903 19,427 3,516,209 513,713 $4,029,922 $2,094,122 579,373 66,393 110,578 12,234 28,903 2,891,603 640,005 $3,531,608 Shareholders' equity PRIA DEVELOPMENTS CORP Consolidated Statement of Earnings (Loss) For the Year Ended December 31 $ amounts in thousands) 2016 $309,579 191,260 2,992 2015 Property revenue Sale of properties developed for resale Dividend income and distributions Gain on fair value increase in investments Other income Foreign exchange gain Gain on derivative instrument Gain on sale of assests $207,331 229,139 2,011 938 3,857 18,305 2,303 2,051 465,935 45,173 147,677 106,818 13,053 39,278 11,051 5,288 1,849 Property operating expenses Cost of sale of properties developed for resale Interest on long-term deb Interest and financing costs Deprec General and administrative Stock-based compensation Foreign exchange loss Loss on derivative instruments Goodwill impairment loss Loss on fair value decrease in investments 443 506,123 84,421 142,841 154,899 11,916 62,860 23,956 307 19,656 18,542 63,456 23,133 605,987 (99,864) (3,781) (96,083) iation and amortization Earnings (loss) before income taxes Total income taxes (recovery) Net earnings (loss) from continuing operations Net loss from discontinued operations Net earnings (loss) 368,338 97,597 16,270 81,327 (2,159) $(96,083) 79,168 PRIA DEVELOPMENTS CORP Consolidated Balance Sheet $ amounts in thousands) December 31 December 31 2015 2016 Assets Non-current assets Investment properties Development properties Currency guarantee receivable Goodwill Investments Restricted cash $3,549,744 $3,304,880 126,522 224,285 28,165 48,594 39,562 27,704 3,868,249 3,547,262 40,086 25,969 Current assets Cash Construction Receivables and other 17,927 225,596 26,694 270,217 $ 4,144,636 $3.817,479 16,359 194,638 65,390 276,387 properties being developed for resale Total assets Equity and Liabilities Total equity Non-current liabilities Long-term debt Derivatives Deferred tax liabilities Other liabilities $ 606,768 $ 886,271 2,901,348 19,427 143,930 29,727 3,094,432 1,910,668 145,559 28,602 2,084,829 Current liabilities Accounts payable and other Income taxes payable Liabilities of discontinued operations Construction financing Current portion of long-term debt 561,122 6,507 28,903 66,393 183,454 846,379 3,537,868 2,931,208 $4,144,636 $3,817,479 255,585 5,739 28,903 102,433 50,776 443,436 Total liabilities Total equity and liabilities PRIA DEVELOPMENTS CORP Consolidated Income Statement For the Year Ended December 31 $ amounts in thousands) 2016 2015 $310,466 186,350 496,816 88,414 143,131 231,545 265,271 (23,956) (307) 1,849 2,992 (286,060) 443 (48,594) $211,025 Property revenue Sales of properties developed for resale Total revenues Property operating expenses Cost o 191,139 402,164 51,854 131,677 183,531 218,633 (11,051) (5,288) 3,857 2,011 55,757 f sale of properties developed for resale Gross income from operations General and administrative Stock- Other income, net Dividend income and distributions Net adjustment to fair value of investment properties Gain on sale of investment properties Goodwill impairm Net adjustment to fair value of held-for-trading based compensation 924 ent loss l assets (23,133) 938 Net adjustment to fair value of derivative financial (18,542) instruments Interest expense Exchange differences, net Income (loss) before income taxes Total income taxes (recovery) Net income (loss) from continuing operations Net loss from discontinued operations Net income (loss) 2,303 (166,815) (119,871) 18,305 166,518 23,864 142,654 (2,159) (276,653) $140,495 (19,656) (316,508) (39,855) (276,653)
