Chapter 3
The Accounting Framework
74
Review Exercise
Hollinger Runners Inc. (HRI) is a publicly traded manufacturer of high quality, stylish sneakers
with hundreds of shareholders.The company has been in business for more than 20 years and has
experienced good and bad economic times.The company’s financial performance has usually been
aligned with the state of the economy. Lately the economy has been booming.
The company has a year-end of April 30. It is now May 31, 2016. HRI produces financial state-
ments on an annual basis.The company’s accountant has prepared the balance sheet as at April 30,
2016 using ASPE. A portion of this balance sheet (i.e. the assets portion) is shown below.
Hollinger Runners Inc.
Balance Sheet
As at April 30, 2016
2016
2015
Assets
(in thousands)
Current Assets
Cash
10
500
Accounts receivable
10
140
Inventory
5
120
Other current assets
60
70
Total Current Assets
85
830
Long-Term Assets
Available-for-sale investments
60
65
Property, plant and equipment
1,210
2,120
Goodwill
40
50
Total Long-Term Assets
1,310
2,235
Total Assets
1,395
3,065
On May 1, 2015, the company changed the location of its headquarters from Europe to Canada.
Therefore, the 2015 column in the balance sheet is presented in the currency unit of euros and the
2016 column is presented in Canadian dollars. The company did not disclose this information in
the notes to the financial statements.The euro was much stronger than the Canadian dollar during
2015 and 2016.
Additional information regarding HRI’s financial statements and accounting records is shown
below.
• HRI indicated in the notes to the financial statements that in 2016 it changed the accounting
policy it used for depreciating assets. However, it did not justify its reason for doing so.
