Reading the case and provide a comprehensive report outlining:

$-3$ accounting policies have been violated for each transaction identified as problematic?

$-$ Prepare the required calculations and journal entries that would convert the problematic transactions identifies in part A$,$ from ASPE to IFRS compliance.

$-$ What adjustments you would recommend to Creative, to ensure that the financial statement at year$-$end $2023$ reflect a reliable, accurate information?

Group Project $-$ Case Analysis

Creative Systems Co$.("$Creative$")$ is a privately held corporation specializing in learning management systems solutions in the digital environment. Their proposed solutions, similar to Blackboard, for example, are implemented in small post$-$secondary education institutions across Canada. The company has been operating from its headquarters in Vancouver since January $2,2020.$ Creative financial statements are unaudited and prepared in accordance with ASPE.

Revenue

The selling price of Creative system solution is $\backslash$$$40,000$ per educational institution over a $4-$year period. The price covers both, the access to a platform interface and the hardware $($such as workstation, projector, and printer$)$ at $\backslash$$$30,000$ and $\backslash$$$10,000$ respectively per client.

Additionally, Creative also provides customized software solutions to cater to the specific educational issues. Such customization will be an additional cost for the post$-$secondary institutions.

Creative prides itself in providing a one$-$stop system solution for their clients. As such, the company has partnered with Stellar Technologies Co$.($Stellar$)$ that provides the hardware to Creative' clients. Through this partnership, Stellar pays Creative a referral fee which is $\backslash (10\backslash \%\backslash )$ of hardware cost for every sale.

Since its inception, the company has recognized all its revenue at the time of sale upon receipt of a signed contract.

From the date the contract is signed, Creative takes an average of three $(3)$ months to establish functionality: from project implementation, hardware setup, to training.

At the end of $4$ years, there is an annual fee for the software license renewal

which is $$1,500$ per each contract sold to the post secondary education

institution. The amount is automatically and fully recorded at the time when

the software license expires.

Here are the annual historical revenues:

Accounts Receivable

Given the relation developed with the customers, Creative writes off only when

any payment becomes uncollectible.

In late $2022,$ to improve the cash flow and liquidity, the company decided to

factor $$80,000$ of its receivable with recourse. The company removes $$80,000$

from its accounts receivable and recorded an interest expense of $$5,000.$

Computer Equipment

In $2020,$ Creative had purchased its computer equipment in Gander

$($Newfoundland and Labrador$).$ Related transportation cost amounted to

$$12,000.$ Insurance while in transit was $$20,000.$ The company also had to

pay technical engineers to install and setup the equipment, costing $$13,000.$

Start$-$up and testing costs were $$5,000.$ Total expenditure $$50,000$ was fully

expensed in $2020.$

In January $2023,$ the company traded one of its IBM server $($Model $19)$ with a

newer HP server $($Model $23).$ Below are the details of the exchange. Based on

the technical specifications, the new HP server will result in improved level of

efficiency for the development team at Creative. At the same of exchange,

Creative considered the transaction without commercial substance.

For the year ended Dec $31,2023$ the company controller gathered the

following information on the computer equipment. Despite evidence from

internal reporting shows performance below expectations, no impairment was

recognized. The company has not conducted any revaluation or impairment

since inception.

Government Grant

The Canadian government is actively promoting e$-$solutions to assist small

post$-$secondary education institutions across Canada. In $2020,$ the federal

government provided a forgivable loan of $$200,000$ to assist Creative with the

purchase of computer equipment which is estimated to have a useful life of

$10$ years. When the funding was received, the company treated it as a normal

expense debiting cash and crediting other income.

The loan would be forgiven over five years on the condition that the company

employs at least two recent graduates per year in the software development

at Creative. The company has managed to fulfill this condition except in $2022$

where it did not hire any recent graduates in the software development

department.

Investment

During $2021,$ Creative purchased $6,000$ Royal Bank shares for $$31$ per share

$($total $$186,000).$ Creative designated $50\%$ of Royal Bank shares as FVPL while

irrevocably elected to record the remaining $50\%$ as fair value changes through

OCI.

Creative held these shares until October $2023,$ when it sold them for $$36$ per

share. During these three years, Royal Bank paid dividends of $$1$ per share

on each November $31.$ On Creative' fiscal year end on December $31,$ Royal

Bank share

At year end December $31,2$