The financial statements for The North West Company Inc. are presented in Appendix A Appendix A Specimen Financial Statements: The North West Company Inc. In this appendix and the next, we illustrate current financial reporting with two different sets of corporate financial statements that are prepared in accordance with International Financial Reporting Standards. We are grateful for permission to use the actual financial statements of The North West Company Inc. in Appendix A. The financial statement package for North West includes the consolidated statement of financial position (which North West calls balance sheet), income statement (which North West calls statement of earnings), statement of comprehensive income, statement of changes in equity (which North West calls statement of changes in shareholders' equity), and statement of cash flows. The financial statements are preceded by two reports: management's responsibility for the financial statements and the auditor's report on these statements. Only selected notes to the financial statements related to the topics included in this textbook have been included in this appendix. The complete set of financial statements and annual report for North West can be found on WileyPLUS. In addition, material about working with annual reports, including the financial statements, is included on WileyPLUS. We encourage you to scan North West's financial statements to familiarize yourself with the contents of this appendix. You will also have the opportunity to use these financial statements in conjunction with relevant chapter material in the textbook. As well, these statements can be used to solve the Financial Reporting and Financial Analysis cases in the Expand Your Critical Thinking section of the end of chapter material. As you near the end of your financial accounting course, we challenge you to reread North West's financial statements to see how much greater your understanding of them has become. Management's Responsibility for Financial Statements The management of The North West Company Inc. is responsible for the preparation, presentation and integrity of the accompanying consolidated financial statements and all other information in the annual report. The consolidated financial statements have been prepared by management in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and include certain amounts that are based on the best estimates and judgment by management. In order to meet its responsibility and ensure integrity of financial information, management has established a code of business ethics, and maintains appropriate internal controls and accounting systems. An internal audit function is maintained that is designed to provide reasonable assurance that assets are safeguarded, transactions are authorized and recorded and that the financial records are reliable. Ultimate responsibility for financial reporting to shareholders rests with the Board of Directors. The Audit Committee of the Board of Directors, consisting of independent Directors, meets periodically with management and with the internal and external auditors to review the audit results, internal controls and accounting policies. Internal and external auditors have unlimited access to the Audit Committee. The Audit Committee meets separately with management and the external auditors to review the financial statements and other contents of the annual report and recommend approval by the Board of Directors. The Audit Committee also recommends the independent auditor for appointment by the shareholders. PricewaterhouseCoopers LLP, an independent firm of auditors appointed by the shareholders, have completed their audit and submitted their report as follows. Edwaalkenay Edward S. Kennedy PRESIDENT & CEO . ga John D. King EXECUTIVE VICE-PRESIDENT & CHIEF FINANCIAL OFFICER THE NORTH WEST COMPANY INC. April 8, 2016 Independent Auditor's Report pwc To the Shareholders of The North West Company Inc.: We have audited the accompanying consolidated financial statements of The North West Company Inc. and its subsidiaries, which comprise the consolidated balance sheets as at January 31, 2016 and January 31, 2015 and the consolidated statements of earnings, comprehensive income, changes in shareholders' equity and cash flows for the years then ended, and the related notes, which comprise a summary of significant accounting policies and other explanatory information. Management's responsibility for the consolidated financial statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor's responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of The North West Company Inc. and its subsidiaries as at January 31, 2016 and January 31, 2015 and their financial performance and their cash flows for the years then ended in accordance with International Financial Reporting Standards. PricewaterhouseCoopers LLP CHARTERED PROFESSIONAL ACCOUNTANTS WINNIPEG, CANADA April 8, 2016 Consolidated Balance Sheets January 31, 2016 January 31, 2015 ($ in thousands) CURRENT ASSETS Cash Accounts receivable (Note 5) Inventories (Note 6) Prepaid expenses $ 37,243 79,373 211,736 7,229 335,581 $ 29,129 72,506 204,812 9,393 315,840 NON-CURRENT ASSETS Property and equipment (Note 7) Goodwill (Note 8) Intangible assets (Note 8) Deferred tax assets (Note 9) Other assets (Note 10) 345,881 37,260 32,610 29,040 13,423 458,214 $ 793,795 311,692 33,653 22,485 28,074 12,555 408,459 $ 724,299 TOTAL ASSETS CURRENT LIABILITIES Accounts payable and accrued liabilities Current portion of long-term debt (Note 11) Income tax payable $ 152,136 $ 138,834 6,271 1,170 146,275 3,365 155,501 NON-CURRENT LIABILITIES Long-term debt (Note 11) Defined benefit plan obligation (Note 12) Deferred tax liabilities (Note 9) Other long-term liabilities 225,489 33,853 2,630 195,125 36,556 2,392 18.710 14.668 Other long-term liabilities 18,710 280,682 436,183 14,668 248,741 395,016 TOTAL LIABILITIES SHAREHOLDERS' EQUITY Share capital (Note 15) Contributed surplus Retained earnings Accumulated other comprehensive income TOTAL EQUITY TOTAL LIABILITIES & EQUITY Approved on behalf of the Board of Directors Eric L. Stefanson, FCPA, FCA DIRECTOR 167,910 2,620 156,664 30,418 357,612 $ 793,795 167,460 2,831 140,527 18,465 329,283 $ 724,299 H. Sanford Riley" DIRECTOR See accompanying notes to consolidated financial statements. Consolidated Statements of Earnings ($ in thousands, except per share amounts) SALES Cost of sales Gross profit Selling, operating and administrative expenses (Notes 16, 17) Earnings from operations Interest expense (Note 18) Earnings before income taxes Income taxes (Note 9) NET EARNINGS FOR THE YEAR NET EARNINGS PER SHARE (Note 20) Basic Diluted Year Ended January 31, 2016 Year Ended January 31, 2015 $ 1,796,035 $ 1,624,400 (1,273,421) (1,160,182) 522,614 464,218 (415,293) (366,752) 107,321 97,466 (6,210) (6,673) 101,111 90,793 (31,332) (27,910) $ 69,779 $ 62,883 $ 1.44 $ 1.43 $ 1.30 $ 1.29 TATTNICTTTTT AVT TDOT NILADIG MTINO Gogola WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING (ooo's) Basic Diluted See accompanying notes to consolidated financial statements. 48,509 48,783 48,432 48,709 Consolidated Statements of Comprehensive Income ($ in thousands) Year Ended January 31, 2016 Year Ended January 31, 2015 NET EARNINGS FOR THE YEAR $ 69,779 $ 62,883 Other comprehensive income/(expense), net of tax: Items that may be reclassified to net earnings: Exchange differences on translation of foreign controlled subsidiaries 11,953 11,384 Items that will not be subsequently reclassified to net earnings: Remeasurements of defined benefit plans (Note 12) 4,583 (11,968) Remeasurements of defined benefit plan of equity investee (15) 30 Total other comprehensive income, net of tax 16,521 (554) COMPREHENSIVE INCOME FOR THE YEAR $ 86,300 $ 62,329 See accompanying notes to consolidated financial statements. Consolidated Statements of Changes in Shareholders' Equity ($ in thousands) Share Capital Contributed Surplus Retained Earnings AOCI(1). Total Balance at January 31, 2015 $ 167,460 $ 2,831 $ 140,527 $ 18,465 $ 329,283 Net earnings for the year 69,779 69,779 Other comprehensive income (Note 12) 4,583 11,953 16,536 Other comprehensive income of equity investee (15) (15) Comprehensive income 74,347 11,953 86,300 Equity settled share-based payments 124 124 Dividends (Note 19) (58,210) (58,210) Issuance of common shares (Note 15) 450 (335) 115 450 (211) (58,210) (57,971) 450 $167,910 $ 166,069 (211) $ 2,620 $ 3,528 Balance at January 31, 2016 Balance at January 31, 2014 Net earnings for the year Other comprehensive income (Note 12) Other comprehensive income of equity investee Comprehensive income Equity settled share-based payments Dividends (Note 19) Issuance of common shares (58,210) (57,971) $156,664 $ 30,418 $357,612 $ 145,762 $ 7,081 $ 322,440 62,883 62,883 (11,968) 11,384 (584) 30 30 50,945 11,384 62,329 373 (56,180) (56,180) 321 (56,180) (55,486) $ 140,527 $ 18,465 $ 329,283 373 1,391 1,391 $ 167,460 (1,070) (697) $ 2,831 Balance at January 31, 2015 (1) Accumulated Other Comprehensive Income See accompanying notes to consolidated financial statements. Consolidated Statements of Cash Flows ($ in thousands) Year Ended January 31, 2016 Year Ended January 31, 2015 CASH PROVIDED BY (USED IN) Operating activities Net earnings for the year $ 69,779 $ 62,883 Adjustments for: Amortization (Note 7, 8) 44,026 40,372 Provision for income taxes (Note 9) 31,332 27,910 Interest expense (Note 18) 6,210 6,673 Equity settled share option expense (Note 13) 386 373 Taxes paid (30,659) (32,881) Loss/(Gain) on disposal of property and equipment 350 (294) 121,424 105,036 Change in non-cash working capital 5,904 9,225 5,904 5,659 132,987 9,225 825 115,086 (63,179) (12,804) 170 (75,813) (49,101) (3,228) 2,017 (50,312) 13,081 Change in non-cash working capital Change in other non-cash items Cash from operating activities Investing activities Purchase of property and equipment (Note 7) Intangible asset additions (Note 8) Proceeds from disposal of property and equipment Cash used in investing activities Financing activities Increase in long-term debt (Note 11) Repayments of long-term debt (Note 11) Dividends (Note 19) Interest paid Issuance of common shares Cash used in financing activities Effect of changes in foreign exchange rates on cash NET CHANGE IN CASH Cash, beginning of year CASH, END OF YEAR See accompanying notes to consolidated financial statements. (58,210) (5,160) 115 (50,174) 1,114 8,114 29,129 $ 37,243 78,572 (75,950) (56,180) (5,713) 321 (58,950) 952 6,776 22,353 $ 29,129 costs for the your ended mury 21 2016 the Company orded $1,392 Carwary 31, 2015 - 54,223) for the wite-down of edo ad using prices and reduction SURUDNO Bugares anthudude erforming al merchandiserwer them Canada Stores last year. There was no reversal of invertortes Pausomaidump INVENTORIES there Look at North West's income statement (which it calls "statement of earnings). Did its sales increase or decrease between 2015 and 2016? Did its net income (which it calls "net earnings) increase or decrease between the two years? ($ in thousands) Change in amount Increased/Decreased Sales $ Net income (net earnings) $ Are its sales and net income moving in the same direction (that is, both increasing or both decreasing)? For North West, both sales and net income are Look at North West's statement of financial position (which it calls "balance sheet"). Identify its total assets, total liabilities, and total shareholders' equity as at (1) January 31, 2016, and (2) January 31, 2015. (1) January 31, 2016 (2) January 31, 2015 ($ in thousands) Total assets $ $ Total liabilities $ $ Total shareholders' equity $ $ Look at North West's statement of changes in equity (which it calls "statement of changes in shareholders' equity"). What were the balances in its share capital and retained earnings accounts at the end of 2016? At the end of 2015? ($ in thousands) January 31, 2016 January 31, 2015 Share capital $ $ Retained earnings $ $ Do these amounts agree to the same balances reported in the shareholders' equity section of the statement of financial position? How much cash did North West have at January 31, 2016? At January 31, 2015? ($ in thousands) January 31, 2016 January 31, 2015 Cash $ $