Mapleleaf Gardens Case Study

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Maple Leaf Gardens Case Study

Concepts:

Ai) There are several different people that would use the financial statements of Maple Leaf Gardens. Investors, whether they are existing or potential, would use the financial statements to help make a decision on how much or if they want to invest in the company. Lenders would use the statements to determine if they are going to lend financial assistance to the company. Government bodies review the statements to make sure they comply with all regulations and to make sure no ethical issues are present. Obviously the upper management uses the financial statements to gain a prospective on how the company is doing. Competitors may use the financial statements as a way to improve their own company.

Aii) The accrual basis of accounting provides a better measure of current performance because it takes into account the company’s accomplishments and resource sacrifices during the period, no matter when the cash is received or paid. Accrual based accounting provides a more accurate picture of a company’s current condition. Maple Leaf Gardens, Ltd uses the accrual based accounting method.

Aiii) The term “going concern” typically means the company prepares it’s financial statements with the intent of continuing to operate in the foreseeable future and that it will be able to realize assets and discharge liabilities in the normal course of operations. Since Maple Leaf Gardens is using the “going concern” assumption, their figures on the financial statements must reflect the value of the company as if it was to remain in business for the foreseeable future. If the company was not using the “going concern” assumption then the figures would need to be at Net Realizable Value.

Bi) Most public companies, such as Maple Leaf Gardens, typically report their financial performance, financial position, and cash flows quarterly and annually.

Bii) I would speculate that Maple Leaf Gardens has a May 31 year end because it aligns closely with their business cycle and their customers. They are an entertainment business in Canada and so I would imagine that their fiscal year revolves around hockey season or close to it.

Biii) Increasing the frequency of reporting would positively affect the reliability of financial reports because there would be less room for error. With the increased reporting, companies would have more representational faithfulness meaning the numbers and descriptions match what really happened. They would also have verifiability in which several independent auditors could reach the same conclusion using the same methods.

Biv) In order to enhance the relevance and reliability of its financial reporting, a company should communicate effectively with the accounting department and upper level managers. The company should also not change accounting policies from one year to the next. The company should make sure that is does not lack bias or neutrality and that it can identify transactions and apply appropriate measurement techniques. This will benefit the managers and shareholders because they will not give false representation of the company. The shareholders will have a true understanding of where the company stands financially.

Ci) Assets are defined as the probable future economic benefits obtained or controlled by a particular entity as a result of a past transaction or events. An example of an Asset from Maple Leaf Garden's financial statements is Cash and Interest bearing deposits

Cii) Liabilities are defined as the probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events. An example of a Liability from Maple Leaf Garden's financial statements is Income and Other taxes payable.

Ciii) Owner's Equity is defined as the residual interest in...
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