Temple Limited is in the real estate business. After several years of economic growth, most of the..

Temple Limited is in the real estate business. After several years of economic growth, most of the company s assets are now worth significantly more than the amount that is recognized on the financial statements. Wanting to capitalize on this positive trend, the company is ready to expand and is looking at developing a new property in the Bahamas that will cost $300 million. Currently, the company s debt to equity ratio is 5:1 and the company needs to raise funds for the expansion. Lendall Bank, the company s primary lender, understands that there is hidden value in the statement of financial position and is willing to finance the project. Temple is now concerned about how the capital markets will react to this increase in debt. The company s shares list on the TSX and, therefore, IFRS is a constraint. Under IFRS, fair value accounting is permitted for real estate as an accounting policy choice. Instructions Adopt the role of Temple Limited s controller and write a memo to address the CEO s concerns.

 

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