Maurice Ltd. is a private Canadian company. It has been preparing its financial statements in accordance with IFRS but is now considering a change to ASPE. For its Year 6 financial statements, Maurice reported the following in accordance with IFRS:

Net income$3,300 Total debt$25,500 Current assets13,900 Total shareholders equity21,800 Current liabilities11,000

You have identified the following three areas in which Maurices accounting policies have differences between IFRS and ASPE:

1. Impairment losses
2. Convertible bonds
3. Income taxes

The controller at Maurice provides the following information with respect to each of these accounting differences and indicates that the Year 6 financial statements reflect the proper accounting for these items in accordance with IFRS:

Impairment Losses

Impairment tests were performed on the companys equipment for Years 5 and 6 with the following results:

12-31-05 12-31-06

Cost of equipment $26,500 $26,500 Accumulated depreciation 5,300 6,360 Carrying amount before impairment 21,200 20,140 Undiscounted future cash flows 19,800 18,300 Value in use 19,200 18,400 Fair value 18,000 18,500 Depreciation expense for year 1,060 1,060

At the end of Year 5, the equipment had an estimated remaining useful life of 20 years. There were no impairment losses prior to Year 5.

Convertible Bonds

Maurice issued bonds for proceeds of $16,000 on January 1, Year 5. The bonds are convertible into common shares at any time within the next five years. The bonds would have been worth only $14,800 if they did not have the conversion feature. The amortization of the discount on bonds was $58 in Year 5 and $59 in Year 6.

Income Taxes

Maurices income tax rate has been and is expected to continue at 40%. The financial statements reflect the future taxes payable method of accounting for income taxes and contain the following amounts:

12-31-05 12-31-06

Future income tax payable	$4,800	$5,020
Future income tax expense	215	220

The CEO is concerned about the impact of converting Maurices financial statements from IFRS to ASPE on the following metrics: current ratio, debt-to-equity ratio, and return on total shareholders equity. Where ASPE provides an accounting policy choice, he wants to choose the method that is most simple and straightforward.

Required:

(a) Calculate the three ratios first using IFRS and then ASPE. Prepare a schedule showing any adjustments to the numerator and denominator for these ratios. Ignore income taxes on the impairment losses and convertible bonds. (Round the final answers for all the ratios to two decimal places. Omit $ and % sign in your response.)

IFRS ASPE Current Ratio Debt to Equity Return on Total Equity

(b) Determine whether Maurices liquidity, solvency, and profitability look better or worse under ASPE after considering the combined impact of the three areas of difference.

Liquidity Look better / Look worse / Remains the same Solvency Look better / Look worse / Remains the same Profitability Look better / Look worse / Remains the same