Case 2 Renovation Costs at the Golf Course Assume today is June 25, 2014. Tony Harper is the manager at Moose Ridge Resort (MRGR) Moose Ridge in 18-hole golf course located north of Saskie toon and near a popular lake. Currently, the course is undergoing renovations The renovations are expected to increase the benefits to be derived from the course over its life Tony remembers that the last set of renovations was completed in 2008 and successfully increased the number of club members by 20 percent, and MRGR has had increased revenues from pre-2008 levels ever since AP VOL 1 No 2 - PC vol. 13.12.2014) SHORT CASES IN HINANCIAL ACCOUNTING 153 The total budgeted cost of the renovation is $10 million. MRGR's beard of directors hats approved, and its management has purchased the materials needed for the renovations. The other major cost of the project is labor time. Ten new employees have been hired to form the renovation team. Labor costs of $250,000 have been incurred since the project began. Although the team is supposed to spend 100 percent of its time on renovations, Tony has witnessed team members performing routine maintenance activities such as mowing the grounds weeding gardent throughout the course, and unloading the supply trucks for the com lounge employees Tony has overheard miny regular golfers in the golfers lounge talking excit edly about the renovation, but Tony is unsure whether the renovations will be stantially increase revenue. The board of directors rejected proposed price increase, and Tony thinks this could limit MRGRS Riture revenues. He remembers when the neighboring golf course was renovated in 2013 and his friend pro shop manager, was disappointed that revenues stayed Wiely consistent with revenues prior to the renovation. On the other hand, Tony know that MRGRM renovations are more extensive than those completed by the competing golf course so perhaps MRGR's revenues are more likely to increase. Not only that, but the renovations are all the regulars can talk about. Tony has hard to than once that the regular polfers plan on bringing to the course friends and family who have never golfod at MRGR before Tony has relayed this information to you. MRGRS controller. You have recorded all renovations costs as experies, but with quartered approaching and after hearing Tony's comments, you decide to take another look to determine whether the costs are correctly recorded as expenses Requirements 1. Identify the applicable accounting standards, woming that MRGR e Inter national Financial Reporting Standards (IFRS) 2. Using IFRS as a guide, prepare analysis of the relevant points of the case and provide a decision about how MRGR should account for its renovation costs Using the information we learned about capital assets, answer the following questions about the week 12 case 1. What the issue in this case? 2. What are the relevant accounting rules? Are there different alternatives in ASPE OR IFRS? 3. Identity alternatives? Are there different ways the accounting issue can be addressed? (try and identity at least two) 4. Evaluate each alternative. What would happen to net income with each alternative (would it be higher, lower, no impact?). Are there any other considerations about each alternative? 5. Analyze all of this information. Based on all the information you gathered in 1-4 is one option more compelling than another? Why? 6. Conclude. Come to a clear conclusion on which alternative you are recommending. 7. Consider implications. Advise on any implications. Can you give advice on an implementation plan? Remember, this week's assignment is not about having the right or wrong answer. It is about the process you use to get to that right or wrong answer. Your grade on this marked question (out of 10) will be based on how well you followed the case evaluation process rather than if you had the correct or incorrect answer, Case 2 Renovation Costs at the Golf Course Assume today is June 25, 2014. Tony Harper is the manager at Moose Ridge Resort (MRGR) Moose Ridge in 18-hole golf course located north of Saskie toon and near a popular lake. Currently, the course is undergoing renovations The renovations are expected to increase the benefits to be derived from the course over its life Tony remembers that the last set of renovations was completed in 2008 and successfully increased the number of club members by 20 percent, and MRGR has had increased revenues from pre-2008 levels ever since AP VOL 1 No 2 - PC vol. 13.12.2014) SHORT CASES IN HINANCIAL ACCOUNTING 153 The total budgeted cost of the renovation is $10 million. MRGR's beard of directors hats approved, and its management has purchased the materials needed for the renovations. The other major cost of the project is labor time. Ten new employees have been hired to form the renovation team. Labor costs of $250,000 have been incurred since the project began. Although the team is supposed to spend 100 percent of its time on renovations, Tony has witnessed team members performing routine maintenance activities such as mowing the grounds weeding gardent throughout the course, and unloading the supply trucks for the com lounge employees Tony has overheard miny regular golfers in the golfers lounge talking excit edly about the renovation, but Tony is unsure whether the renovations will be stantially increase revenue. The board of directors rejected proposed price increase, and Tony thinks this could limit MRGRS Riture revenues. He remembers when the neighboring golf course was renovated in 2013 and his friend pro shop manager, was disappointed that revenues stayed Wiely consistent with revenues prior to the renovation. On the other hand, Tony know that MRGRM renovations are more extensive than those completed by the competing golf course so perhaps MRGR's revenues are more likely to increase. Not only that, but the renovations are all the regulars can talk about. Tony has hard to than once that the regular polfers plan on bringing to the course friends and family who have never golfod at MRGR before Tony has relayed this information to you. MRGRS controller. You have recorded all renovations costs as experies, but with quartered approaching and after hearing Tony's comments, you decide to take another look to determine whether the costs are correctly recorded as expenses Requirements 1. Identify the applicable accounting standards, woming that MRGR e Inter national Financial Reporting Standards (IFRS) 2. Using IFRS as a guide, prepare analysis of the relevant points of the case and provide a decision about how MRGR should account for its renovation costs Using the information we learned about capital assets, answer the following questions about the week 12 case 1. What the issue in this case? 2. What are the relevant accounting rules? Are there different alternatives in ASPE OR IFRS? 3. Identity alternatives? Are there different ways the accounting issue can be addressed? (try and identity at least two) 4. Evaluate each alternative. What would happen to net income with each alternative (would it be higher, lower, no impact?). Are there any other considerations about each alternative? 5. Analyze all of this information. Based on all the information you gathered in 1-4 is one option more compelling than another? Why? 6. Conclude. Come to a clear conclusion on which alternative you are recommending. 7. Consider implications. Advise on any implications. Can you give advice on an implementation plan? Remember, this week's assignment is not about having the right or wrong answer. It is about the process you use to get to that right or wrong answer. Your grade on this marked question (out of 10) will be based on how well you followed the case evaluation process rather than if you had the correct or incorrect
