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Product cover image for Encana Corporation: Accounting for Foreign Currency

Encana Corporation: Accounting for Foreign Currency

Darren Henderson; Chris Sturby; Gillian Heisz

Product #:9B12B031
Supplier:Ivey
Discipline:Accounting, International Business
Setting:Canada, 2012
Details:Case (PDF) • 25 pages • 2012-11-07 (Rev: 2012-12-10)

Subjects:

Finance and investingBusiness managementAccountingInternational business

Industries:

Energy and natural resources sector

Geography:

CanadaNorth America
Your Price:$9.71

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In 2012, Encana is reassessing its choice for functional currency and presentation currency. Historically, Encana has used Canadian dollars for its functional currency and US dollars for its presentation currency, but changes in Encana’s operations over the past several years have caused the company to revisit its choices. For functional currency, Encana must determine whether Canada continues to represent its primary economic environment. Further, Encana must consider whether its reasons for using U.S. dollars as presentation currency remain valid. To make its decisions, Encana must apply the guidance in IAS 21, “The Effects of Changes in Foreign Exchange Rates.” Finally, Encana must determine the impact of its choices on the financial statements.

Learning Objectives

The Encana case is designed for use in an intermediate or advanced course on financial accounting at either an undergraduate or graduate level to illustrate the choices surrounding accounting for foreign currency. As secondary learning objectives, students are exposed to segmented reporting and the challenges associated with operating in the oil and gas industry. The case revolves around the primary choices in IAS 21, “The Effects of Changes in Foreign Exchange Rates,” specifically, the choice of functional currency and the choice of a presentation currency.
  • To assess functional currency, students must apply the IFRS guidance and consider Encana’s segmented reporting.
  • To assess presentation currency, students must consider the needs and perceptions of its financial statement users.
  • To illustrate the impact of foreign currency reporting choices, students are expected to perform analysis on Encana’s US-dollar denominate debt.
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Case Study: Encana Corporation: Accounting for Foreign Currency (English version) | Ivey Publishing