Sunday News Roundup 23.03.12: Accounting for grocery moguls, EY presses pause, and more Canadian accounting news
Wrapping up the odds and ends from the past week in Canadian accounting news
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TORONTO, Mar. 12, 2023 – Canadians were treated this week to the unprecedented spectacle of three grocery store moguls grilled over food prices. In the media coverage of the testimony, little attention was paid to the role that accounting standards play in the financial reporting of the companies. While some politicians and pundits called for more transparency, perhaps they felt there was little sizzle in a grilling of accounting standards.
The main line of defence of Galen Weston Jr., in particular, is that Loblaw profits have been driven by non-food items such as drugstore products (e.g., Shoppers Drug Mart), clothing (Joe Fresh) and other items. But that assertion cannot be confirmed because the company’s financial statements don't break down the margins for different categories of goods. International Financial Reporting Standards (IFRS) allow for the aggregation of operating segments with economically similar characteristics.
It's an important facet of the debate, outlined by the research of Dalhousie food researcher Sylvain Charlebois — who has shot to stardom during the greedflation debate — and business reporters such as David Milstead of the Globe and Mail. The last time we saw IFRS similarly scrutinized by mainstream media was in the lofty marijuana valuations of cannabis companies that ultimately went up in smoke.
As Charlebois writes in his research of Loblaw and its financial results, “We find it interesting that Loblaws can justify food and non-food (healthy, beauty, apparel, and other general merchandise) as a combined operating segment which satisfies both IFRS 8.12(a) the nature of the product and services, and IFRS 8.12(b) the nature of the production process. It is unclear how food retail and drug retail are similar in nature, sales or production.”
As reported by Canadian Accountant, it is interesting to note that George Weston Limited (GWL) — the parent company of Loblaw — switched auditors in September 2021. After a quarter-plus century of KPMG balancing its books, GWL swtiched to PricewaterhouseCoopers LLP, which must have made a lot of partners happy at PwC. Of the combined $16.3 million in new audit fees earned by PwC in 2021, the Weston companies accounted for more than $8.8 million, earning net audit fees gained of $12.5 million.
Portland Hotel poor protest public accountant at Deloitte
Residents of the Portland Hotel in Vancouver’s Downtown Eastside protested outside the new offices of Deloitte Canada on Wednesday. Why? Because Varun Banthia, a policy specialist at the Deloitte Future of Canada Centre, sits on the board of directors of the PHS Community Services Society, the non-profit that runs the non-profit housing charity that includes the Portland Hotel. And the Portland Hotel has been having elevator issues (among other things) that seriously impact the lives of the residents, who are mostly lower-income, disabled or dealing with addictions.
It was an effective protest, garnering media attention from the Vancouver Sun and even Going Concern. The spectacle of poor people protesting outside the Deloitte Summit was too ironic for media outlets to ignore. But all indications are that Varun Banthia, who serves as treasurer, actually cares about social issues and marginalized people, if his Twitter feed is any indication.
Anyone who has lived in a Canadian condo knows that elevators are always breaking down and repairs can take weeks, sometimes months, due to a variety of reasons. And anyone who works in public accounting at the Big Four knows that fast-track achievers are encouraged to join boards of all kinds in part to further business opportunities. Kind of seems like Mr. Banthia doesn’t deserve the attention.
EY presses pause on protracted plans for split
Current and retired partners at Ernst and Young have kicked up such a fuss that EY Global has had to delay its planned split (again) into two separate business units. The news was reported by the Financial Times UK and Wall Street Journal this past week. Apparently it all comes down to auditors in the US, who want a larger portion of the tax practice to be retained within the audit arm after the split.
Meanwhile, the chief executive officer of Deloitte Global, Joe Ucuzoglu, put out an unintentionally hilarious video lauding the “multidisciplinary” traditional approach of the Big Four public accounting model. Watch Joe read from a teleprompter and enunciate his words like Christopher Walken as he dumps all over Ernst and Young. According to the WSJ, “All but 50 to 75 of EY’s 13,000 partners had been assigned to one firm or the other.” So EY Canada partners, which business are you going to?
Will supreme court justice’s absence affect upcoming tax decisions?
News leaked out this past week about the reasons for the absence of Justice Russell Brown from the Supreme Court of Canada. Brown, who was appointed by Stephen Harper to the Supreme Court in 2015, was temporarily relieved of his duties last month.
Surprisingly, the details of the altercation were reported by the conservative Postmedia newspaper chain, which led Brown to issue a statement calling the allegations “demonstrably false” this week, and the scandal even got coverage from the New York Times. While the details of Brown allegedly getting punched out by an ex-Marine at a fancy Arizona spa resort are pretty gossipy, will his absence affect the important tax cases before the Supreme Court?
There’s the Deans Knight case, Dow Chemical and quite a few others. Brown is a self-described “conservative libertarian” whose appointment was decried by some legal scholars but he tends to agree with majority opinion when it comes to tax matters. For example, Brown wrote the majority decision in Rite-Way Metals, a retroactive tax planning case, and Collins Family Trust, a recission case that many tax professionals hoped would go the other way.
In other words, to use a comparison many Canadians might understand, if Justice Suzanne Côté is Clarence Thomas, then Brown is more like John Roberts. His absence from the Court might certainly impact criminal and constitutional cases but is unlikely to impact tax decisions.
Quick Hits: Articles of Interest
What to do if the CRA flags your tax return for an audit (Yahoo Finance)
Property taxes are popping in some cities – how worried should you be about other tax hikes? (Globe and Mail)
Naming your estate, or charities, as beneficiary of your RRSP or RRIF (Globe and Mail)
High interest rates mean you don't want to be late if you pay income tax by instalments (Financial Post)
Jack Mintz: We need to re-think our climate policies and sync them with the U.S. (Financial Post)
PwC hit with $8.9 million penalty for 'serious breaches' on Babcock audits (Reuters)
Accountants Have to Go to College for Five Years. Some Are Rethinking That. (Wall Street Journal)
By Canadian Accountant staff.