King Investments Corp (King) is a publicly traded investment company that was established in Burlington, Ontario in 2007. King's mission is to provide a balanced investment portfolio for its investors to earn a stable return. The company's investment strategy is to hold investments as they rise in value over the long-term rather than buying and selling in the short-term. Today is September 10, 2017. You, CPA, are an audit senior with Maple and Maxwell Chartered Accountants (M&M). M&M has been King's auditor since incorporation. The audit partner, Cary Maxwell, just left you the following email : "King has experienced a lot of change recently. In January 2017, the company's CFO was terminated due to performance issues. King hired a new CFO, Rick Kesler, in March 2017. Rick is very involved in King's operations and has instituted a process whereby he must approve each investment prior to the Board of Directors (Board) providing final approval. "I met with Rick earlier this week and a summary of our discussion is in Appendix I. Please prepare a memo analyzing any new accounting issues that will impact the December 31, 2017 financial statements. I also want you to detail the audit procedures that should be performed for the key risk areas. As you know, King reports under International Financial Reporting Standards."

APPENDIX I

NOTES FROM DISCUSSION WITH RICK KESLEr, CFO

Rick has accounted for all of King's new investments at cost as he wanted to use the simplest method. The investments include:

Lakeside Arena (purchased for $5.0 million), an arena with seating for 5,000 spectators that King rents out to two minor league hockey teams as well as to various figure skating competitions and curling tournaments.

60% investment in the Ottawa Dribblers ($3.5 million), a National Basketball Association expansion team.

50% investment in Canadian Sports Limited ($2.4 million), owner of the Hamilton Terriers hockey and Niagara Pioneers baseball franchises. King has one voting share while the other party who also owns 50% has two voting shares. All decisions must be approved via unanimous vote.

21% investment in the Mississauga Minors ($2.0 million), a minor football franchise. The Mississauga Minors have two other owners, with 55% and 24% ownership respectively. The other two owners have representation on the Mississauga Minor's Board of Directors while King does not. As part of this purchase, King agreed not to sell this investment at any time in the next three years.