Question

RA7.3 Canadian Tire Corporation, Limited

Canadian Tire Corporation, Limited is one of Canada's best-known retailers. The company operates 501 “hard-goods” retail stores through associate dealers, 386 corporate and franchise stores under its subsidiary Mark's Work Wearhouse, 298 independently operated gasoline sites, and 427 FGL Sports retail stores (operating under banners including Sport Chek, Sports Experts, and Atmosphere). It offers financial services through its branded credit cards and now provides personal loans and a variety of insurance and warranty products.

Instructions

Access the financial statements of Canadian Tire Corporation, Limited for its year ended December 30, 2017, either on the company's website or the SEDAR website (www.sedar.com). Refer to these financial statements and their accompanying notes to answer the following questions.

a. How does Canadian Tire define cash and cash equivalents on its SFP? What is included in the cash and cash equivalents balance at December 30, 2017?

b. What criteria does the company use to determine what short-term investments to include in this category?

c. Review the financial statements and notes and identify the assets reported by Canadian Tire that qualify as loans and receivables. Does the company disclose the amount of its allowance for doubtful accounts? What was the amount of impairment for credit losses for the year? How does the company determine the allowance for impairment? Be specific. What were the amounts for the write offs, recoveries, and impairment for credit losses for the year?

d. When is a loan impaired? How does Canadian Tire value an impaired loan? Be specific.

e. Accounting standards require companies to disclose information about their exposure to credit risk. What is credit risk? What does Canadian Tire report? What is your assessment of its exposure to credit risk?

f. Canadian Tire uses its accounts receivable to generate cash before the receivables are due via securitization. Briefly describe the forms of “securitization” activities that the company uses. Does Canadian Tire have a continuing relationship with the accounts?

Answer 1

Company - Canadian Tire Corporation, Limited

Year – 2017 Audited Financial

How does Canadian Tire define cash and cash equivalents on its SFP? What is included in the cash and cash equivalents balance at December 30, 2017?

As per Audited Financial , Cash and Cash Equivalent as on 31^st Dec 2017 amount C$ Mio 437 . Breakdown of cash and cash equivalent are as below :

Amnt- C$ Mio	2017	2016
Cash and Cash Equivalent
Cash	104.4	81
Cash Equivalent	321.5	738.2
Restricted Cash	11.1	10.5
Total cash and cash Equivalent	437	829.7
Bank Indebtness	0	-5.9
Cash and cash Equivalent ( net of Bank Indebtness)	437	835.6
Restrcited cash towards payment of Note Holders
and addition funding cost
Cash and cash Equivalent are amount held in reserve to support
of financial service Liquidity and regulatory requirement

What criteria does the company use to determine what short-term investments to include in this category?

As per audited financial report , company established “ Short term Investment in 2017 amount to C$ Mio 132.5

As per cash flow position , company in the current year made acquisition of short term Investment amount to C4 Mio 421.9 , also made proceed from the maturity and disposition of short term Investment amount to C$ Mio 452.6

Answer c-

Allowance For Credit Losses
Amnt- C$ Mio	2017	2016
Opening balance	106.9	111.5
Impairment for credit losses (Net of recoveries)	298.9	293.7
Recoveries	70.8	69.4
Write off	-365.5	-367.7
Balance at the end of the Year	111.1	106.9
Loans include credit card loans and line of credit loans
No Allowance for credit losses have been made with respect
to Franchise Trust and FGL loan receivable

The company’s aging of the loans and receivable that are past due , but not impaired is as follows

Amnt- C$ Mio
Loans Receivable	1-90 days	> 90 days	Total 2017	1-90 days	> 90 days	Total 2016
Loans Receivable	305	63.6	368.6	308.6	58,3	308.6

Credit card loan are considered impaired and written off when a payment a 180 days in arrear . Line of credit loans are considered impaired when a payment is over 90 days in arrear and are written off when a payment is 180 days in arrears

No collateral is held against loan receivable , except for loans to dealer

Trade Receivable
Amnt- C$ Mio	2017	2016
Trade Receivable	657.9	614.2
Derivative	23.2	76.6
Total Financial Asset	681.1	690.8