XLF Inc. (XLF) is a publicly listed entity operating in Calgary, Alberta. XLF is a resource...

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XLF Inc. (XLF) is a publicly listed entity operating in Calgary, Alberta. XLF is a resource exploration company. Recently, the energy industry has experienced many disruptive changes, particularly to the price of oil. XLF is preparing for the annual year-end audit, and the controller is analyzing her options regarding recording a provision related to an orphan (abandoned) well. The controller expects that materiality will be $250,000, which is the materiality from last year's audit. The reports from the geologists estimate that the cost to remediate one orphan well range from $180,000 to $300,000. XLF has struggled with profitability this year. The CFO stated at the last board meeting that all employees have a responsibility to control costs to help restore XLF's profitability and, in turn, the share price. The controller decides not to record the provision for the orphan well in order to do her part to help the company's profitability. Also during the last board meeting, the board of directors stated its concern regarding the price of oil and the impact that this could have on revenues in the upcoming year. Required: a) Who are the users of the financial statements for XLF? Consider both external and internal users. b) The Conceptual Framework for Financial Reporting discusses the need for relevance and faithful representation as fundamental qualitative characteristics of financial information. If the controller does not record the provision for the orphan well, is relevance of the financial information achieved? Why or why not? (Consider materiality in your response.) c) If the controller omits the provision from the financial statements, which of the three attributes of faithful representation will be affected? XLF Inc. (XLF) is a publicly listed entity operating in Calgary, Alberta. XLF is a resource exploration company. Recently, the energy industry has experienced many disruptive changes, particularly to the price of oil. XLF is preparing for the annual year-end audit, and the controller is analyzing her options regarding recording a provision related to an orphan (abandoned) well. The controller expects that materiality will be $250,000, which is the materiality from last year's audit. The reports from the geologists estimate that the cost to remediate one orphan well range from $180,000 to $300,000. XLF has struggled with profitability this year. The CFO stated at the last board meeting that all employees have a responsibility to control costs to help restore XLF's profitability and, in turn, the share price. The controller decides not to record the provision for the orphan well in order to do her part to help the company's profitability. Also during the last board meeting, the board of directors stated its concern regarding the price of oil and the impact that this could have on revenues in the upcoming year. Required: a) Who are the users of the financial statements for XLF? Consider both external and internal users. b) The Conceptual Framework for Financial Reporting discusses the need for relevance and faithful representation as fundamental qualitative characteristics of financial information. If the controller does not record the provision for the orphan well, is relevance of the financial information achieved? Why or why not? (Consider materiality in your response.) c) If the controller omits the provision from the financial statements, which of the three attributes of faithful representation will be affected?

Answer rating: 100% (QA)

a The users of the financial statements for XLF can be both internal and external The internal users may include the management team employees and boa... View the full answer