Refer to the Notes to Consolidated Financial Statements for Reitmans (Canada) Limited in Appendix A.
Instructions
(a) Subsection b) of Note 2, Basis of Presentation, states that the financial statements have been prepared on the historical cost basis except for available for sale financial assets and derivative instruments and the pension liability. Reitmans' available for sale financial assets are short-term investments in marketable securities classifyed as current assets. Why does Reitmans report these investments at fair value?
(b) Subsection l) of Note 3, Significant Accounting Policies, describes Reitmans' revenue recognition policy. When does Reitmans recognize revenue for gift cards and loyalty points and awards? Does this policy seem reasonable to you given the nature of gift cards and loyalty point programs? Explain why or why not, referring to the appropriate revenue recognition criteria and concepts in the conceptual framework.
(c) Note 23, Credit Facility, discloses that Reitmans had unsecured operating lines of credit available up to $125 million. Do you think this additional disclosure was necessary? Explain why or why not, referring to the appropriate concepts or items from the conceptual framework of accounting in your answer.
(d) Reitmans' independent auditors' report is provided in Appendix A with the company's financial statements. What is the purpose of an independent audit? What did Reitmans' auditors say about the company's financial statements?