Rovincial Liquor Corp. (PLC) controls the sale and distribution of all alcohol products in the Canadian province in which it operates. It operates on a for-profit basis, is controlled by the provincial government, and administers the Liquor Control Act. PLC has financial and operational control over its business activities. It has the power to contract in its own name, and it can sue and be sued.

 

PLC's revenues come from two main sources: (1) retail sales of alcohol, which are made through its more than 150 stores across the province, and (2) wholesale alcohol sales to restaurants, bars, and other commercial customers. PLC has a long history of profitability that provides the provincial government with a consistent flow of revenue.

 

You, CPA, are assigned to the financial statement audit of PLC for the December 31, 2020, year-end. PLC has been a client of your firm for several years. It is now October 15, 2020, and you are performing some interim work. PLC is having a somewhat less successful year compared to prior years. The province is experiencing an economic downturn that has resulted in slightly higher unemployment and a higher rate of small business failure.

 

Required:

The co-op student assisting you on this engagement is wondering what the appropriate financial reporting standards are for PLC.

Explain the appropriate financial reporting standards to use for this public sector organization, using support from the introduction to public sector accounting standards.