Blaser Inc. is a public company that trades on the Toronto stock exchange. It is a supplier of many of the most commonly used pharmaceuticals in Canada. In the last few years the company's growth has been due to acquisitions rather that research and development. The company now focuses on distribution. The industry is regulated in terms of the selling price that it can ask for its product. The company also has $50 billion in debt. In the course of the audit of BLASER, you, accountant- in training, while reviewing the draft financial statements for the year ended August 31, 2022, noticed a few items that you believe should be brought to the attention of the partner in charge of the audit. On June 30, 2022 Blaser acquired 19% of the shares of Natural Science Inc. (NSI). NSI is a public company and its remaining shares are held, 40% by the original owners and the balance widely held. NSI earned $310,000 in the last 6 months. Blaser paid $450,000 for the shares. Blaser has 2 of the 5 members on the Board of Directors of NSI. Blaser distributes the NSI product and hopes to increase this relationship. The The fair value of the NSi shares at year-end is $430,000.

On January 1, 2022 BLASER's invested in Canadian Pharmaceuticals Limited (CPL) for $3,200,000, representing a 22%interest in CPL. This investment had been made to infuse freshequity, with a view to protecting BLASER's source of supply for drugs.

BLASER's controller informed you that CPL had suffered a large loss of $1,500,000 in fiscal 2022, asshown by the May interim financial statements. BLASER's representative on CPL'sboard of directors had resigned because BLASER's purchases from CPL now constituted less than 5% of BLASER's total purchases. In addition, CPL had been uncooperative in providing profit data in time to make the year-end equity adjustment.Consequently, BLASER's controller has decided that the method of reporting for theInvestment in CPL should be at FVTPL.BLASER is reluctant to divest itself of CPL in case the rumoured developmentby CPL of a new drug to reduce the impact of long term Covid materializes.

When you approached CPL's managers, they refused to disclose any information on CPL's operations. You then learned from a stockbroker friend that CPL's poor results were due to its market being undercut by generic drug manufacturers. The loss had been increased when CPL's management wrote off most of CPL's intangible assets.

On January 1, 2022 Blaser acquired 100% of the net assets of Dart Science Inc. (DSI). Blaser acquired the company because it was researching a very interesting drug that could potentially cure some cancers. Blaser paid $7,000,000 for the net assets and at the time the book value on the financial statements of DSI was $5,000,000. During the year DSI reported a loss of $1,500,000.

This year BLASER sold drugs to an online pharmaceutical company; NPCO. The drugs were sold at cost + 20%. BLASER does not own any shares in NPCO but does have an option to buy all the shares at $0.During the audit you noticed that many of the goods sold to NPCO were still in the NPCO inventory. This on-line pharmacy buys all of its product from BLASER. There is no disclosure regarding NPCO on the draft financial statements.

You also found out that BLASER's managers are planning a share issue in 2023and do not want the company earnings impaired by poor performance.

Required:

Prepare the report to the audit partner discussing the relevant financial reporting issues.