Big Town Hydro: An Accounting Choice Case*

Abstract

This fictional case is based on the real-world events when a Canadian public electric utility company adopted IFRS. Many of these firms previously used US GAAP. In this context, the case gives students the opportunity to research key differences between IFRS and US GAAP relevant to utility industries, discuss the impact of IFRS standards on a firm's performance, and make recommendations on important business decisions. Specifically, this case exposes students to (i) the rate-regulated electric utility industry and complex regulatory deferral accounts; (ii) the impact of IFRS adoption on key financial ratios and bond issuance decisions; and (iii) a what-if analysis in making business decisions under the new IFRS 16 standard. This case is suitable for use in undergraduate or graduate intermediate level financial accounting courses. It can also be explored in an advanced level or public sector accounting class.