Issues referred to you by the CFO of Raven Ltd (Raven):

1. In September 2021 Raven’s production facility was inspected by the provincial government. The inspector noted a number of violations of provincial health and safety laws and Raven was advised that it would have to take corrective action within six month or face significant fines or even closure of the facility. It will cost about $1.45 million to correct the violations. The CFO wants to know the impact on the financial statements of doing the modifications in December versus January.

Required: This company has adopted IFRS and is being audited this year for the first time. How to account for these issues as well as your thoughts on what, if anything should be done by the end of the year for there to be a desirable accounting outcome regarding them. The CFO said that it was very important for Raven to show immediate improvement in performance in terms of net income and the debt-to-equity ratio.