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 Table of Contents—Volume 1 vii

Nature of Income 85
General Presentation Format 87
Income Tax Allocation 96
Asset Disposals, Discontinued Operations, and Restructuring 97
Summary of Key Points 117
Key Terms 117
Review Problem 3-1 118
Review Problem 3-2 122
Case 3-1 123
Case 3-2 124
Case 3-3 125
Technical Review 128
Assignments 133

Chapter 4 Statements of Financial Position and Changes in Equity;

Disclosure Notes 147
Introduction 147
Statement of Financial Position 148
Purpose and Limitations 152
Specific SFP Items 155
Statement of Changes in Equity 158
Accounting Changes 164
Disclosure Notes 167
Summary of Key Points 177
Key Terms 178
Review Problem 4-1 179
Review Problem 4-2 181
Review Problem 4-3 183
Case 4-1 184
Case 4-2 185
Case 4-3 188
Technical Review 189
Assignments 194

Chapter 5 The Statement of Cash Flows 221

Introduction 221
Interpretation Issues 234
Analyzing More Complex Situations 236
Disclosure of Cash Flows for Interest, Dividends, and Income Tax 246
Summary of Adjustments in Operating Activities 251
viii Table of Contents—Volume 1

Summary of Key Points 253

Key Terms 254
Review Problem 5-1 254
Case 5-1 258
Case 5-2 260
Case 5-3 261
Technical Review 264
Assignments 268
Appendix: Spreadsheet Method 297
Summary of Key Points 300

Chapter 6 Revenue Recognition 301

Introduction 301
Definitions 302
The Revenue Recognition Process 303
General Revenue Recognition Principle 303
Contract Costs 306
Transfer of Goods and Services at a Single Point in Time 307
Transfer of Goods and Services over Time 316
Long-Term Contracts Measured over Time 319
Licensing Fees 326
Measurement of Consideration 327
Multiple Goods and Service Contracts 330
Accounting for Losses on Long-Term Contracts 334
Non-monetary Transactions 339
Interest and Dividend Income 346
Choosing a Revenue Recognition Policy 346
Revenue on the Cash Flow Statement 348
Summary of Key Points 352
Key Terms 354
Review Problem 6-1 354
Review Problem 6-2 358
Review Problem 6-3 363
Case 6-1 363
Case 6-2 365
Case 6-3 368
Case 6-4 369
Technical Review 370
Assignments 373
 Table of Contents—Volume 1 ix

Chapter 7 Financial Assets: Cash and Receivables 387

Introduction 387
Financial Assets 388
Cash and Cash Equivalents 389
Accounts Receivable 392
Transfer of Receivables 399
Notes Receivable 404
Foreign Currency Receivables 411
Statement of Cash Flows and Disclosure 411
Summary of Key Points 416
Key Terms 417
Review Problem 7-1 417
Case 7-1 420
Case 7-2 421
Case 7-3 422
Technical Review 426
Assignments 429
Appendix: Bank Reconciliation 446
Summary of Key Points 451

Chapter 8 Cost-based Inventories and Cost of Sales 452

Introduction 452
Right to Recovery Assets 454
Cost-based Inventories 454
Applying Lower-of-Cost-or-NRV Valuation 460
Other Issues for Cost-based Inventories 463
Inventory Estimation Methods 466
Reporting Issues 470
Summary of Key Points 474
Key Terms 475
Review Problems 8-1 475
Review Problems 8-2 477
Review Problems 8-3 477
Case 8-1 479
Case 8-2 480
Case 8-3 482
Technical Review 484
Assignments 489
Appendix: Periodic versus Perpetual Systems 508
x Table of Contents—Volume 1

Chapter 9 Long-lived Assets 517

Introduction 517
Categories of Long-lived Assets 517
Valuation of Long-lived Assets 518
Recognition of Property, Plant, and Equipment 519
Cost of Property, Plant, and Equipment 523
Biological Assets 532
Intangible Assets—Elements of Cost 532
Specific Intangible Assets 534
Goodwill 538
Derecognition of Long-lived Assets 541
Long-lived Assets on the Statement of Cash Flows 543
Presentation and Disclosure 544
Summary of Key Points 551
Key Terms 552
Review Problem 9-1 553
Case 9-1 555
Case 9-2 556
Case 9-3 557
Technical Review 559
Assignments 563
Appendix 1: Investment Property 580
Summary of Key Points 583
Appendix 2: Government Assistance 583
Summary of Key Points 586

Chapter 10 Depreciation, Amortization, and Impairment 587

Introduction 587
Review of Definitions—Depreciation and Amortization 588
Accounting Policy—Choice of Method 590
Depreciation and Amortization Methods 594
Component Depreciation Accounting 599
Additional Depreciation or Amortization Issues 601
Impairment of Long-lived Assets 604
Disclosure Requirements 611
Statement of Cash Flows 616
Summary of Key Points 619
Key Terms 620
Review Problem 10-1 621
 Table of Contents—Volume 1 xi

Case 10-1 622

Case 10-2 624
Case 10-3 625
Technical Review 627
Assignments 631
Appendix 1: Capital Cost Allowance 648
Summary of Key Points 651
Appendix 2: Revaluation Model 651
Summary of Key Points 656

Chapter 11 Financial Instruments: Investments in Bond and Equity

Securities 657
Introduction 657
Investment Objectives 658
Categories and Classification of Passive Investments 659
Categories and Classification of Bond Investments 660
The Amortized Cost (AC) Method 661
The Fair-Value-through-Other-Comprehensive-Income-Bond Method
(FVOCI-BOND) 671
Classification and Accounting of Passive Share Investments 676
Passive Share Investments: The Fair-Value-through-Profit-or-Loss
Method (FVTPL) 677
Estimating Fair Value 684
Categories and Classification Criteria for Strategic Investments 691
The Equity Method 693
Consolidation 698
Reclassification 700
Disclosure and SCF Requirements 702
Looking Ahead 705
Accounting Standards for Private Enterprises 708
Summary of Key Points 714
Key Terms 715
Review Problem 11-1 715
Case 11-1 718
Case 11-2 719
Case 11-3 721
Case 11-4 723
Technical Review 725
Assignments 729
xii Table of Contents—Volume 1

Appendix Fundamentals: The Accounting Information

Processing System (AIS) 747
Accounts, Transaction Recording, and Financial Statements 747
The Impact of Technology 750
The Accounting Cycle 750
Subsidiary Ledgers 768
Special Journals 768
Worksheets 773
Summary of Key Points 777
Key Terms 778
Review Problem 778
Technical Review 784
Assignments 787

Compound Interest Tables and Formulae 819

Index IN-1
 Preface

Welcome to the complex Canadian GAAP reporting environment! The vast majority of Canadian public companies prepare
financial statements that comply with International Financial Reporting Standards (IFRS), as set by the International
Accounting Standards Board (IASB) and contained in the CPA Canada Handbook, Part I. In contrast, Canadian private
companies may choose to comply with either IFRS or Canadian Accounting Standards for Private Enterprise (ASPE), as
contained in the CPA Canada Handbook, Part II. These two sets of GAAP are similar in many respects but quite different
in other respects. This duality presents a huge challenge to accountants, managers, and financial statement users.
Clearly, accounting standards are ever expanding, and change is the norm; you might find the expanding universe of
accounting knowledge to be intimidating. Intermediate accounting is the essential course for developing both the technical
skills and the professional judgement that you need to succeed. We believe that neither technical knowledge nor professional
judgement is sufficient on its own; it is the blend of the two that represents the value added by a professional accountant.
So that is what Intermediate Accounting will do for you: provide complete, appropriate technical knowledge while also
developing your professional judgement. Both these elements are described in the broad range of topics in this book. We
clearly explain the standards, identify patterns, explore the impact of alternatives on users and uses of financial statements,
and look forward to further changes that are on the horizon. Throughout this book, we stress the importance of ethical
standards—an accountant must learn to recognize and respond appropriately in potentially challenging situations.
In selecting material to include in this book, we have assessed the realities of Canadian business practice and the choices
that are currently available. We have a distinctly Canadian agenda, looking at the issues that matter in Canadian business.
We are clear in our treatment of the body of knowledge. Our coverage does not get bogged down in the (sometimes twisted)
past history of a given issue, nor does it speculate needlessly on what might or might not happen in the future. Our emphasis
is on preparing you to apply the standards now in place, providing an overview of some expected changes, and moving to
develop the necessary judgemental skills to apply those standards wisely and effectively. These same judgemental skills will
serve you equally well even when standards change in the future, as they undoubtedly will.
After you master the contents of Intermediate Accounting, you will be able to account for the wide range of events and
transactions found in this unique and challenging economic environment. We are proud that this book is now in its seventh
edition. Many thousands of students have started their substantive study of the corporate reporting environment with this
book. In addition, many people have supported the evolution of this book over the last 25 years, and we are very grateful for
their encouragement and continued goodwill.

IFRS and ASPE

A Canadian agenda means that we all must master international standards. Every chapter is based first and foremost on IFRS.
Differences between ASPE and IFRS are explained in a separate section, to provide clarity regarding one set of standards
as compared with the other. Assignment material reflects both IFRS and ASPE so that applications reflect the dual GAAP
environment.

Technical Knowledge
Accountants have to be able to account for things! The seventh edition provides a level of expertise that must become part
of every accountant’s body of knowledge: how to record a receivable, capitalize a lease, account for a pension, or prepare a
statement of cash flows. Some of the transactions that we must account for are very complex, and the specific rules must be
mastered. An affinity for numbers is important.

xiii
xiv Preface

Professional Judgement
Professional judgement, it is often said, is the hallmark of a profession. There are often different ways to account for the
same transaction. Professional accountants must become expert at sizing up the circumstances and exercising judgement to
determine the appropriate accounting policy for those circumstances.
Once an accounting policy has been established, management almost always must make accounting measurement estimates
before the numbers can be recorded. Accounting estimates require the exercise of professional judgement.
Professional judgement is not acquired overnight. It is nurtured and slowly grows over a lifetime. In this book, we
begin the development process by explicitly examining the variables that companies consider when evaluating their
options, and the criteria that accountants use to make choices. Many opportunities to develop and improve judgement
are provided in the case material.

Accuracy
The text has been extensively reviewed and proofread prior to publication. Chapter material has been reviewed by
professional accountants. All assignment materials have been solved independently by multiple individual “assignment
checkers” in addition to the authors. Nevertheless, errors may remain, for which we accept full responsibility. If you find
errors, please email the authors at [email protected], [email protected], or [email protected]. Your
help will be greatly appreciated.

Key Changes for the 7th Edition Update

Chapter 2
The chapter has been updated for the changes in The Conceptual Framework that was updated in March 2018 and now
includes new sections on the reporting entity and derecognition.
The primary focus of Chapter 2 is on the accounting choice process, emphasizing underlying assumptions, qualitative
characteristics, and measurement methods. The basic reporting framework having been set in Chapter 1, Chapter 2
further develops the theme of professional judgement. This chapter explains the basic assumptions underlying financial
reporting and then moves on to develop the qualitative characteristics that must be considered when developing professional
approaches to accounting issues.
Ethical issues are strongly emphasized in this chapter, as they are throughout the book. After discussing the broad
recognition issues for revenue and expense, the chapter then sets out the elements of financial reporting. The increased
incidence of fair-value measurement within IFRS requires that the traditional distinction between “revenue” and “gains” be
modified.
By the end of Chapter 2, all of the factors and elements underlying the exercise of professional judgement have been laid
out and clarified. These factors and elements underlie the professional judgements that students must make as they move
through the text, particularly in the case material at the end of each chapter.

Chapter 18
The chapter deals with the IFRS lease accounting requirements for the lessee and has been updated for the new lease
accounting standard. IFRS requires all leases longer than one year to be capitalized, although classes of low-value assets can
be excluded. The chapter details recording of the right-of-use asset and the lease liability and accounting implications for
remeasurements and sale and leaseback transactions. Definitions under IFRS and all the examples have been updated.
ASPE accounting standards for leases are significantly different than IFRS requirements and the chapter details
classification requirements for a capital lease and the accounting treatment for operating and capital leases from the lessee’s
perspective.
The Appendix outlines the accounting requirements for leases for lessors under IFRS and ASPE, which had few changes.
 Preface xv

Topical Review Identifying Key Changes for the 7th Edition

Chapter 1
The book starts by exploring the multiple accounting frameworks in use in Canada for public companies and private
companies—IFRS standards for public companies, IFRS or ASPE or DBA for private companies. The chapter then explores
the issue of international comparability and the difference between nations in their acceptance of IFRS—whether a nation
adopts, adapts, or harmonizes with IFRS. While companies in different countries may use IFRS, the financial reports still
embed significant differences that arise from differences in nations’ economic, business, and sometimes even religious
practices.
After establishing the multiple GAAP frameworks, our attention turns to the basis of application of any framework. Before
we can make judgements on choosing accounting policies and making accounting estimates, we must understand the many
possible (and often conflicting) objectives underlying a company’s financial reporting. Thus, the second major theme of the
first chapter is how the many different factors and influences shape a company’s financial reporting. This is fundamental
material that supports professional judgement.
Chapter 1 has been extensively revised and rewritten for this edition, with new exhibits to further clarify the material.

Chapter 3
Chapter 3 discusses the nature of income and the difference between the economic and accounting concepts of income.
The statement of comprehensive income is explained, and emphasizes the distinction between operating income and
comprehensive income. The general presentation approach is explained, along with format variations that are accepted in
practice.
Chapter 3 contains the book’s primary discussion of asset disposals, discontinued operations, and restructuring.
Discontinued operations is just one part of a broader issue of asset disposals. We have introduced asset disposals in
this chapter to provide a clearer context for understanding discontinued operations. We discuss and provide examples of
all forms of asset disposals, including abandonment, sales of individual assets, sale of asset groups, and discontinued
operations. Because asset disposals are often connected with restructurings, we also present the criteria and reporting
requirements for restructuring plans as well as the requirements for reporting constructive obligations that frequently
accompany restructurings.
The chapter ends with a discussion of ASPE and the ways in which the reporting requirements for private enterprises using
ASPE differ from enterprises reporting under IFRS.

Chapter 4
This chapter begins with a general discussion of the purpose and limitations of the statement of financial position. This
discussion includes an explanation of the different ways in which the assets, liabilities, and shareholders’ equity can be
presented, depending on the individual regional practice.
Specific individual items on the statement are then discussed. IFRS requires certain items to be reported on the face of the
statement but does not prescribe a specific format.
The next section discusses and illustrates the statement of changes in equity. We illustrate that the statement of changes in
equity (SCE) includes not only the “normal” shareholder accounts (e.g., share equity and retained earnings) but also each of
the various components of other comprehensive income.
In the fourth section, we have expanded the overview of accounting changes, including changes in estimate, changes
in accounting policy, and error correction. Accounting changes are pervasive, and this section prepares students to
understand accounting changes as they move through the specific topics that comprise the rest of the book. A full
discussion of accounting changes is reserved for the end of the book, Chapter 21 (in Volume Two).
The final section is a discussion of disclosure notes. This section reflects the current disclosure requirements of IFRS,
including related party transactions, segment reporting, contingencies, and guarantees.

Chapter 5
The statement of cash flows (SCF) is dealt with in sequence, as a primary financial statement. The chapter deals with the
mechanics of statement preparation, using both a format-free approach and the T-account method. The journal-entry-based
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xvi Preface

worksheet approach is included in an appendix. Coverage is linked to the reporting example of International Forest Products,
to emphasize IFRS presentation issues and judgemental presentation choices. Presentation of investment revenue cash flow,
interest, and dividends paid is discussed and illustrated in a separate section. Statement of cash flows (SCF) issues are
reviewed in every subsequent chapter of the text book. And, new in this edition, there is a comprehensive SCF review at the
end of Volume Two.

Chapter 6
Revenue is one of the most judgemental areas of accounting policy choice and new standards requiring a contract-based
approach must be adopted by 2018 although earlier adoption is permitted. For the seventh edition of the book, this chapter
reflects the new standard for revenue recognition under IFRS and specifically outlines the five criteria required for revenue
recognition. A consistent approach is used to apply these criteria to determine the appropriate revenue recognition for
various types of transactions. Specifically, the chapter provides examples of revenue transactions, including sales with rights
of return or warranty agreements, bill and hold arrangements, consignments, and licensing fees. Transactions involving
multiple deliverables are explained, with examples of loyalty point programs and franchisee fees provided. In accounting for
long-term contacts, examples illustrate contracts requiring revenue to be recognized at a single point in time and contracts
requiring revenue to be recognized over time.
Biological assets and agricultural produce are also discussed in the chapter. Barter transactions and exchanges of similar and
dissimilar goods or services are important but challenging aspects of accounting. The chapter puts these transactions into
a broader context and illustrates, based on IFRS, just how each of the various types of non-monetary exchanges should be
measured and reported.
The chapter also details the revenue recognition standard under ASPE, which is now different than under IFRS. ASPE still
requires an earning-based approach be used for revenue recognition. Significant differences are explained and examples
provided where necessary. In addition, there is a brief discussion on the accounting treatment of related party transactions
and non-monetary transactions under ASPE.

Chapter 7
This chapter now deals with two important financial instruments: cash and receivables. Coverage of payables has been
shifted to Volume Two. Classification and valuation decisions are central to the coverage of cash and receivables. New to
this edition are the new impairment guidance and revised financial asset classifications in IFRS 9. Important topics, such as
foreign currency translation (a must, in this age of globalization) and the IFRS rules governing the transfer of receivables,
are incorporated. Material on bank reconciliations is in an appendix, and coverage of present and future value calculations
is available online on Connect, as is a more extensive set of compound interest tables.

Chapter 8
This chapter conforms to the IFRS approach applying lower of cost and market valuation methods wherein the IFRS defines
“market” as net realizable value. Also, we explain the process for writing inventory back up if NRV recovers before the
inventory is sold.
This chapter provides focus on many accounting issues with respect to inventory: items to include or exclude, lower of cost
or NRV valuation, onerous contracts, errors, and estimation techniques.
Inventory valuation raises the possibility of unethical behaviour. Therefore, the chapter includes discussion of the ethical
issues surrounding inventory valuation and accounting.

Chapters 9 and 10
Accounting for fixed assets and intangible assets is challenging in the IFRS context. There are three possible models to
consider depending on the type of asset: the fair-value model, the revaluation model, and the cost model. Also, component
accounting and depreciation add complexities to the accounting for fixed assets. Impairment testing and reversals will
create more volatility in earnings using IFRS. These chapters systematically look at acquisition, amortization, impairment,
and disposal considering both the IFRS and ASPE. The appendices cover the complexities related to investment property,
government assistance, capital cost allowance, and the revaluation model.
 Preface xvii

Chapter 11
This chapter reflects coverage of IFRS 9, effective in 2018 but available for early adoption. Accounting for passive
investments, including amortized cost, fair value through profit and loss, and fair value through other comprehensive income
are explained and illustrated for bond and equity investments. Accounting for investment revenue and impairment is also
discussed with many numeric examples provided. The classification of strategic investments based on the level of control
and influence is examined as related to associates, joint arrangements and subsidiaries. The accounting methods for strategic
equity investments including cost, equity method, and consolidation are briefly addressed. Both policy and numeric issues
are thoroughly explored. The chapter includes a number of helpful diagrams and figures to help clarify the roadmap through
this complex territory. ASPE alternatives are very different in this area, and the choices are documented, described and
illustrated where necessary.

Volume One Appendix—Fundamentals: The Accounting Information Processing

System (AIS)
The Appendix reviews the accounting cycle from the original transaction to the journals, trial balance, and preparation
of financial statements. Examples of adjusting journal entries are discussed as well as subsidiary ledgers and worksheet
applications. Extensive examples are used to illustrate the accounting cycle.

Chapters 12 and 13
There are two chapters on liabilities to start Volume Two. Chapter 12 deals with operating payables, as well as notes payable
and provisions. The chapter includes some examples of liability measurement that require discounting. We hope that this
shorter chapter is an appropriate way to start off a new term! This chapter fully reflects IFRS and ASPE standards in the
area.
Chapter 13 delves into long-term debt, using bonds as an example. The chapter relies on discounted cash flow models for
liability measurement, accompanied by the effective-interest method of amortization. Straight-line amortization is illustrated
in the ASPE section. Various valuation and measurement complexities are covered, including the effect of upfront fees and
derecognition scenarios. This chapter includes a section on the capitalization of borrowing costs.

Chapter 14
This chapter deals with straightforward shareholders’ equity issues. Multicolumn presentation of the shareholders’ equity
statement, consistent with International Accounting Standard 1 (IAS 1), is completely incorporated. Classification and
presentation of amounts in accumulated other comprehensive income, (e.g., from fair-value-through-other-
comprehensive-income [FVTOCI] investments, and certain foreign currency gains/losses) is included, and is supported by
assignment material. Summary charts have been incorporated, where appropriate.

Chapter 15
One major topic in this chapter is classification: debt versus equity, compound financial instruments, and the like.
Classification is based on the substance of a financial instrument rather than its legal form. A major section covers the IFRS
approach to share-based payments, emphasizing the estimates needed for measurement and forfeitures. Basic patterns for
option accounting are established. Finally, the material on derivative instruments is included in this chapter. While many of
the complexities of derivatives are appropriately left to advanced accounting courses, this introduction is vital. We think that
the material is clear and understandable, at an appropriate level for Intermediate courses.

Chapters 16 and 17
Accounting for income tax remains two separate chapters, to acknowledge that many instructors prefer to spend two blocks
of time on this most challenging area. The Chapter 16 material establishes a three-step process for typical situations. The
focus of Chapter 17 remains accounting for the tax effect of losses—carrybacks and carryforwards. This is difficult material
for students, but the Chapter 17 problems incorporate the prior-chapter material and allow solid reinforcement of the steps
associated with tax accounting. The ASPE section explains the taxes payable method that is available for private enterprises.

Chapter 19
Pensions and other post-retirement benefits are highly complex arrangements, with correspondingly complex accounting
treatment. The current IFRS standard is emphasized, wherein three elements are identified and recorded. ASPE coverage is
xviii Preface

included. This chapter also includes an example of accounting for other post-retirement benefits and appropriate coverage
of defined contribution plans, since the latter are gaining in popularity.

Chapter 20
Earnings per share material includes an explanation of basic and diluted earnings per share (EPS). IFRS terminology is
used throughout. The procedural steps associated with organizing a complex EPS question are emphasized to provide more
comfort and support in this complicated area. There are a variety of useful summary figures and tables.

Chapter 21
Accounting policy changes and error corrections require restatement of one or more prior years’ financial statements.
Restatement is surely an important topic, given the number of fraud-based restatements reported in the public press in recent
years. Also, the ongoing changes in accounting standards means that companies must often restate their accounts. This
chapter deals with the theory and mechanics related to such restatement, reflecting current IFRS standards.

Chapter 22
The text concludes with a review of financial statement analysis and emphasizes the importance of accounting policy choice
and disclosure in the analysis of published financial statements. The chapter provides an in-depth discussion related to the
type of information to gather specifically to assist with the analysis. Each of the ratios described in the chapter are calculated
for the same sample company, and the results are analyzed, taking into consideration the entity’s business and industry. There
is an extensive case illustration, showing restatements, which demonstrates the importance of accounting policy choice.

Volume Two Appendix—Statement of Cash Flows

SCF topics have been explained in each chapter of the text, and students have had assignment material to reinforce each
topic. However, some instructors prefer to end the course with a comprehensive review of SCF topics, as review and
reinforcement. This Appendix gathers material that will support this approach. The Appendix is based on a T-account
analysis, and has an appropriate range of assignment material.

Pedagogical Walkthrough
Introduction
Each chapter has an introduction that explains the objectives of the chapter in narrative form.

Concept Review
Throughout each chapter concept review questions are included. Students can stop and think through the answers to
these basic questions, covering the previously explained material. This helps comprehension and focus! Answers to these
questions can be found online on Connect.

CONCEPT REVIEW

1. What is the definition of "current" for current assets and current liabilities?
2. Why might some of a company's major "assets" not appear on the SFP?
3. What interpretive problems arise from the fact that the financial statements of public companies
are consolidated?

Figures and Tables

Where appropriate, chapter material is summarized in figures and tables to establish the patterns and help reinforce material.
 Preface xix

EXHIBIT 6-1

THE REVENUE RECOGNITION PROCESS

Performance complete, but Received consideration but Performance complete and

conditional right to consideration performance not yet completed unconditional right to
consideration

Goods and services transferred but Payment received (or receivable) Goods and services transferred and
receipt of consideration is conditional before goods and services are unconditional right to
(e.g., delivering another distinct transferred consideration
performance obligation)

DR Contract Asset/Accrued Receivable DR Accounts Receivable (or Cash) DR Accounts Receivable (or Cash)
CR Revenue CR Contract Liability/ CR Revenue
Unearned Revenues

Conditions are met and now Performance is completed (goods

unconditional right to consideration and services are transferred)

DR Accounts Receivable/Cash DR Contract Liability/Unearned

CR Contract Asset/Accrued Revenue
Receivable CR Revenue

Ethical Issues
Many chapters discuss accounting issues that raise ethical concerns. These concerns are highlighted in the chapter. Where
ethical issues are particularly problematic, we have included a separate “Ethical Issues” section to help students focus on the
ethical aspects of policy choice.
Ethics assignment material has also been incorporated into the case material. Essentially, when an accountant makes
a recommendation on a contentious choice of accounting policy, ethics are tested. Students exercise true-to-life ethical
judgement when they have to make a tough judgement call and recommend an accounting policy that is “good” for one
group but “bad” for another. These ethical overtones are highlighted in the case solutions to help instructors draw them out
in discussion and evaluation.

ETHICAL ISSUES

Choice of accounting policy must be based on the facts, the user environment, and the competitive situation.
Policies chosen to manipulate certain measurements, or foster erroneous conclusions by financial statement users,
are not acceptable. However, accountants must be aware of the implications of choosing a certain policy. A
decision to capitalize costs, and amortize them over the period of use instead of immediate expensing, will
effectively transfer the cash outflow out of operating activities and show the outflow under investing activities.
xx Preface

Accounting Standards for Private Enterprises

At the end of each chapter, there is a section that expands on essential items to understand for Accounting Standards for
Private Enterprise (ASPE) in Canada. These sections include numeric examples, where appropriate. The ASPE sections
provide students and instructors with a detailed, but easy-to-use guide to these important standards.

Accounting Standards for Private Enterprises

Balance Sheet
Canadian ASPE continues to use the title balance sheet, but use of that title is not
required. Statement of financial position remains an acceptable alternative. The general
format of the balance sheet is the same as for IFRS. CPA Canada Handbook, Part II,
section 1521, contains a list of items that should be “separately presented.” Some of these
will usually appear on the face of the balance sheet, but some may be disclosed in the notes. The only
items in the list that do not specifically appear in IFRS are:

• Prepaid expenses
• Obligations under capital leases
• Asset retirement obligations

Looking Forward
Standards are constantly evolving and changing! To help keep abreast of forthcoming probable changes, at the end of each
chapter we provide a discussion of key anticipated changes in IFRS and/or ASPE standards.

Relevant Standards
At the end of each chapter, we provide a comprehensive list of the IASB and ASPE standards that are relevant to the material
in that chapter. We have not quoted the standards directly in chapter material, and we have not provided paragraph references
to either the IASB publications or CPA Canada Handbook. This omission is intentional—the two sources are harmonized
but may use different words. Also, the IASB makes “annual improvements” that change the wording of some standards. Our
focus is on the application of standards, not the technicalities of the wording.

RELEVANT STANDARDS

CPA Canada Handbook, Part I (IFRS):

• IAS 1, Presentation of Financial Statements

• IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors
• IAS 24, Related Party Disclosures
• IAS 10, Events after the Reporting Period
• IAS 37, Provisions, Contingent Liabilities and Contingent Assets
• IFRS 8, Operating Segments
Exploring the Variety of Random
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The vicar made no reply to this; but there was evidently nothing
convincing to him in his wife’s contempt for the stranger. When he
spoke again, it was upon a fresh subject.
“Vernon’s getting very thick with the new people at the Hall Farm. I
met him to-day arm-in-arm with papa, and I hear that he’s going to
dine with them next Friday. Now, papa is a very amiable man, though
he may not be over-endowed with brains; but I suppose it is not far-
fetched to imagine that there may be another attraction.”
Mr. Brander spoke in his usual light and genial tones, without even
the touch of seriousness he had shown when treating of this same
subject with his brother. But the effect of his words on his wife was
instant and strong. The lines of her handsome mouth grew straight
and hard, her low, handsome forehead puckered with an anxious
frown as she said sharply—
“He must be stopped.”
The vicar, raising his eyebrows blandly, stroked his chin, and looked
out of the window.
“Yes, my dear, I admit that it would be very much for the best if he
could be stopped; but the question is, how is it to be done? All we
can do is to persuade, exhort, advise. And haven’t we done it—
perhaps even overdone it? If Vernon takes it seriously into his head
that he will marry, why, marry he will; and I don’t see how all the
king’s horses, and all the king’s men, can prevent him.”
“Perhaps not,” said his wife, icily. “But I can.”
Her mouth, which was Mrs. Brander’s most eloquent feature, closed
with almost a snap, and strongly suggested the idea that her interest
in her brother-in-law’s matrimonial inclinations was not purely
benevolent.
“Well, my dear, there is no denying that it would be for the best if you
could prevent this rather foolish flirtation with a particularly
headstrong girl from coming to anything. One can scarcely think that
this type of girl, for all her beauty and high spirit I think we must allow
her, would make him happy as a wife.”
“I hadn’t thought of the matter from that point of view,” said his wife
drily.
The vicar glanced rather uneasily at his wife, whose habit of looking
at things from a purely matter-of-fact and practical point of view
sometimes jarred upon his more easy-going nature.
He rose from his seat, and prepared to leave the room.
“But you should, my dear; you should,” he said in a gently
reproachful tone, as he came to the back of her chair and, gently
stroking her dark hair with his plump white hand, printed an
affectionate kiss on the smooth white forehead, from which the frown
had scarcely yet departed.
As soon as her husband had left the room, Mrs. Brander gave
herself up to resolute consideration of a difficult and delicate plan of
action. After some time she came to a decision, and her face
cleared.
“To-day is Wednesday,” she said to herself, glancing at an almanac
on her writing-table. “This dinner, or luncheon, or whatever it is, is
not till Friday. Then I have to-morrow to work in.”
And she rose with a sigh of relief, and went about her household
duties with a lighter heart, feeling that she had provided for the
fulfilment of a very disagreeable task in a rather able manner.
On the following afternoon Mrs. Brander, after a short drive in the
neighborhood, drove her little ponies up to the door of Rishton Hall
Farm to make her first call upon Mrs. Denison. The latter lady had
already expressed some indignation that the vicar’s wife had not
called upon her before, and had even announced her intention of
being “not at home” to Mrs. Brander, to show her sense of the folly of
such airs in a woman who ought, by virtue of her husband’s office, to
be the humblest in the parish. However, what happened when the
smart-looking little pony carriage drew up at the door was this: the
farmer’s wife, after peeping through the dining-room curtains, in a
flutter of excitement, rushed across the hall to the drawing-room,
with a hoarse whisper of directions to the approaching housemaid,
and greeted the visitor, on her entrance, with a mixture of dignity and
effusiveness, which the vicar’s wife met with her usual,
straightforward, matter-of-fact simplicity of manner. Mrs. Brander had
brought her ten-year-old daughter with her, less for companionship
than for the reason, which she would at once frankly have owned,
that the child’s fragile fairness formed an admirable compliment to
her own brunette beauty. The child also served to make the
introduction of the two ladies less formal, as her presence resulted in
Mrs. Denison sending for her own two spoilt children, whom Mrs.
Brander greeted courteously, but without effusiveness. Indeed, she
afterwards described them as the two most intolerable little offences
against humanity she had ever met, and she was much too frank to
do more than veil this feeling even in the presence of their mother,
whose caresses of the little Kate and compliments on her beauty
evidently excited in the more sensible of the two mothers no
approval whatever.
The vicar’s wife had something in her mind that she considered of far
more importance than any matter connected with mere children.
Before very long she brought the conversation round to Olivia
Denison, of whom she took care to speak with such exceedingly
moderate approbation as she thought likely to suit a step-mother’s
taste. Mrs. Denison was delighted to meet some one who did not go
into the usual raptures about the young girl’s beauty and amiability.
“Olivia is not a bad sort of girl,” she admitted, in a patronizing tone.
“But she has been terribly spoilt by her father. Her temper is almost
unbearable, and I regret to say that she does not scruple to indulge it
on my poor children.”
“I should think you would be glad to get her married and settled, both
for her sake and your own, then,” said Mrs. Brander. “She is a showy
sort of girl, who ought to marry even here.”
Mrs. Denison looked for a moment rather embarrassed.
“Well, certainly,” she admitted grudgingly. “A gentleman has already
made his appearance who seems to be attracted by her—at least, so
her father thinks. I myself shall not see him till to-morrow, when he
comes to luncheon here.”
“Indeed!” cried Mrs. Brander, raising her eyebrows with great
apparent interest. “I wonder if it is any one I know?” Mrs. Denison
gave a little cough of uncertainty.
“Well,” she said at last, with some hesitation, “I hope I’m not letting
out a secret, but it is your own brother-in-law, Mr. Vernon Brander.”
Mrs. Brander almost started from her chair in well simulated horror
and surprise.
“Vernon!” she exclaimed, in a low voice. “Impossible!” Mrs. Denison
turned pale.
“Why not?” she faltered. “Surely there is nothing against the vicar’s
brother!”
Mrs. Brander hesitated, in much apparent confusion and distress.
“I would not for the world have been the first to break it to you, and
even now I scarcely like to tell you. In fact, I will not unless you will
promise that it shall make no difference in your treatment of the
unhappy young fellow,” she said at last.
Mrs. Denison, shaking with curiosity and alarm, gave the required
promise in an unconvincing tone.
“Years ago,” began the vicar’s wife in a tone lowered to escape the
children’s ears, “Vernon unhappily became involved in an intrigue
with the sister of the man who occupied this house, and at last, after
a quarrel, she mysteriously disappeared, and has not since been
heard of.”
“Murdered!” shrieked Mrs. Denison, startling the children, who all
turned round, and caused her to put sudden constraint upon herself.
“Hush!” said Mrs. Brander, rather alarmed by the strength of her
effect. “We don’t like to think that; we mustn’t think that. But there is
just enough unpleasantness about the affair. You understand,” she
murmured confidentially.
“I should think so!” cried Mrs. Denison, heartily. “I’ll take care that he
shall never——”
The vicar’s wife interrupted her, laying a persuasive, but not feeble,
hand on the arm of the excited lady.
“You will take care never to hint a word of this to him, or to any one,”
she said, in a low, but exceedingly authoritative, tone. “You
remember your promise. Without any measure so strong as that, we
women always know how to give an acquaintance who is in any way
undesirable not too much cold shoulder, but just cold shoulder
enough.”
She rose to go, feeling that she had done enough to accomplish her
purpose.
“I think that ought to do it,” she said to herself, with subdued and still
somewhat anxious satisfaction, as she whipped up her ponies, and
drove away from the farm.
 CHAPTER XIII.
The second Mrs. Denison was, unfortunately for her husband’s
household, one of those ladies who unite in themselves most of
woman’s typical frailties. One of the most marked of these was a
great jealousy of any member of her own sex who was younger,
better looking, or in any way considered more generally attractive
than herself. This jealousy rose to such a pitch in the case of her
handsome step-daughter that she was more pleased at the
discovery of the ineligibility of Olivia’s new admirer than disappointed
at the failure of a prospect of getting rid of her.
In spite of her promises to Mrs. Brander, Mrs. Denison of course told
her husband that night, with some triumph, what a desperate
character he proposed to introduce into the bosom of his household
on the following day. But her sensational tirade produced little effect.
Mr. Denison had indeed heard the old story since he gave the vicar
of Saint Cuthbert’s his invitation; and, to tell the truth, it had rather
tended to increase than diminish the liking he had taken to the
parson. An injudicious liking for the girls was a humanising foible
which he could understand and excuse. As for the disappearance, it
was an old story, and might contain an old slander. At any rate, even
a murderer was better than a milksop. So he made light of his wife’s
deep-voiced harangue, and pronounced his opinion that Mrs.
Meredith Brander might find something better to do than to spread
these foolish stories concerning her brother-in-law.
“Then you mean to take no steps, in the face of what I have told you,
to prevent your own hearth from being polluted by the presence of a
murderous libertine?” inquired Mrs. Denison, who had the liking of a
narrow and half-educated mind, in moments of excitement, for
language equal to the occasion.
“Well, I’m not going, after inviting a man to luncheon, to rush out and
tell him we have heard a cock-and-bull story about his doings a
quarter of a century ago, and so we can’t let him come in.”
“And so Beatrice and Reginald are to get their ideas of the church
from this man? I might have known what sort of a clergyman you
would pick up, who would never receive Mr. Lovekin or Mr.
Butterworth! I am told this Mr. Vernon Brander doesn’t even dress
like a clergyman.”
“He wears a round collar,” said Mr. Denison; “perhaps that will save
the morals of Beatrice and Reginald. Anyhow, he doesn’t talk up in
his head like old Buttermilk, and he doesn’t look so like a trussed
chicken as that lean-necked Lovekin used to do.”
“At least there was no scandal about either of those gentlemen,” said
his wife with dignity. “A girl could trust herself with either of them.”
“She’d have an odd taste if she couldn’t.”
“Perhaps you have no objection to this man as a suitor for your
daughter?”
“He hasn’t proposed yet.”
“Or to the chance of her being found dead in a mysterious manner.”
“Perhaps he doesn’t make away with more than seventy-five per
cent. of the girls he comes across. Olivia might take her chance,”
said Mr. Denison, who was getting sleepy, and had had enough of
the conversation.
This flippancy silenced her for a time; but it had for its permanent
effect on Mrs. Denison the strengthening of her resolution to show
this black sheep of the church what a high-principled British matron
thought of him.
When, next day, the Reverend Vernon Brander arrived at the farm
for luncheon, his evil star brought him before Olivia had returned
from her morning walk. He was shown into the drawing-room, where,
by Olivia’s orders, in honor of his coming, a fire blazed in the usually
cheerless grate; for Mrs. Denison, although an indolent and
extravagant housekeeper, practiced from habit a dozen
uncomfortable and futile little economies, which she had learnt in her
childhood’s days in her father’s small shop. On learning of the
guest’s arrival, she made no haste to receive him; and Vernon was
left for some time to an uninterrupted study of the room.
He decided at once, his thoughts while in this house all taking the
same direction, that Olivia seldom or never sat in the room, that she
did not like it, but that, nevertheless she had had something to do
with the arrangement of it, and that much of the decorative work,
both of needle and paint brush, with which it was adorned, was done
by her active fingers. The position of each article of furniture was too
coldly correct to please her, Vernon, used to the society of a woman
of taste, felt sure. There was no pretty disorder of open book or
music, untidy work-basket, with its picturesque overflow of feminine
trifles; no disarranged cushion; no displaced chair. The piano was
shut—looked even as if it might be locked; the furniture, of the pretty,
modern, spindle-shanked, uncomfortable type, was evidently
scarcely ever used. Vernon had time to wander about at his leisure
until he found something which roused in him more than a passing
interest. This was a large photographed head of Olivia, which stood
by itself in a dark corner on a side table in a handsome oak frame. It
had evidently been taken quite recently, and was an excellent
likeness. Vernon could not resist the temptation to take it up and
carry it to a window to examine it, as he could not do in the obscurity
to which it had been condemned. Then, as he was still left
undisturbed, he put the portrait on a centre table in the full light, and
opening an album which lay not far off, began hunting for more
photographs of the same girl. He found a page containing four, taken
at different stages of childhood and gawky young girlhood. Going
down on his knees beside the large portrait, he held open the album
immediately underneath it, and began tracing out the development of
the woman from the child with the deepest interest.
Absorbed, as his habit was, in the occupation of the moment, he did
not hear, or did not heed, the approach of footsteps across the hall.
The door had not been properly closed, and, before he could change
his position, it had been thrust open with peremptory touch, and he
was in the presence of his hostess.
Glancing from him to the portrait on the table, and thence to the book
in his hand, Mrs. Denison saw or guessed how he was employed,
and feminine jealousy and dislike increased the horror and
indignation she was nursing against this homicidal clergyman whom
her husband had chosen to exalt at the expense of her own chosen
divines. She stood with a stony and most unwelcoming face while
Vernon, rising hastily with a bright laugh, shut the album, and came
forward to meet her.
But she put forward no cordial hand, and vouchsafed him only the
coldest little nod of the head. Vernon mistook the reason of this
reception, confounding the step-mother with the mother, and
supposing that his hostess was in arms at the liberty he had taken in
thus openly worshipping at the young girl’s shrine.
“I must apologize for my attitude of apparent devotion,” he said; “but
I was so much interested in tracing the development of the child as
shown here,” and he held out the album, “into the woman as
represented here,” and he touched the portrait on the table, “that I
did not notice how unnecessarily devout my position had become.”
“Very unnecessarily,” assented Mrs. Denison, in a hard and frigid
tone.
Poor Vernon looked much disconcerted by this rebuff.
“I hope you will believe,” he began, almost stammering in his
confusion, “that I had no intention of taking a liberty in admiring your
daughter’s portrait so openly——”
“My step-daughter’s!” interrupted Mrs. Denison, with a snap.
“Oh, ah, yes—I mean your step-daughter’s,”—floundered Vernon,
more perplexed than ever. If she did not care about the girl, why this
anger? “You must all be so much accustomed to the admiration Miss
Denison excites that even an eccentric tribute may, I hope, be
excused.”
With masculine want of tact he was getting deeper and deeper into
the mire. Mrs. Denison’s cold, pale, plump face grew every moment
more forbidding.
“The place is not so overrun with admirers of Olivia Denison as you
seem to imagine,” said she, acidly. “There is nothing the matter with
the girl’s face; on the other hand, we are not accustomed to consider
it anything to rave about. We Londoners like beauty of a more
delicate type.”
“If by delicate you mean puny and pale,” said Vernon, with rash
honesty, “you certainly won’t get us up here to agree with you. But if
you mean refined, I can’t imagine a face more ideally satisfying in
that respect than Miss Denison’s.”
This was the last straw. The one consolation Mrs. Denison always
had ready for herself on the irritating subject of Olivia’s beauty was
that her own flaccid paleness made the girl’s bright coloring look
“vulgar.” She had made her entrance in an aggressive mood; every
word the unfortunate man had uttered had increased her prejudice
against him, and had seemed specially designed for her annoyance.
Inflamed by sullen anger, and rushing to the favorite conclusion of
the ill-bred that she had been “insulted,” Mrs. Denison let loose upon
her guest the vials of her wrath. She had just enough sense of
decency not to get loud in her anger; but her thin, compressed lips
and coldly venomous grey eyes struck a sort of terror into the
unsuspecting clergyman, before her slow words came like the crash
of a thunderbolt upon his ears. Mrs. Denison prefaced her speech by
a hard, short laugh that scarcely moved the muscles of her flabby
face.
“I suppose your taste still runs in the same direction that it did ten
years ago then, and that you admire red-cheeked farmers’ daughters
as much as ever?”
“I don’t understand you, madam,” said Vernon, growing paler than
ever, if that were possible, but losing his nervousness in the face of
this preposterous attack.
His recovered self-possession irritated Mrs. Denison, who had
expected him to cower under her onslaught. Although she was
already growing alarmed at what she had done, she was too sullenly
obstinate to draw back, and she strengthened herself, even while her
breath came faster and a slight flush came over her face, with the
conviction that she was unmasking villainy, and putting to rout a man
who was a disgrace to his sacred calling.
“Indeed, I should have thought that in this house, of all others, your
memory would have been better.”
As Mrs. Denison had remained standing, Vernon had perforce done
the same. He now took a step to the left, so that the light might fall
on his face as well as on hers as he answered her.
“If you have any accusation to make against me, will you be kind
enough to make it in so many words, and not in roundabout hints?”
He had managed to make the woman feel the full awkwardness of
the position into which she had brought herself. She hesitated and
stammered, even though her grey eyes did not flinch from their
vindictive stare.
“I—I had heard—everybody has—stories which—a clergyman, too!
—I should never have thought——”
“No. People never do think, when they bring a vague charge, that
they ought to be ready to substantiate it. Will you tell me what you
heard?”
“I am not to be brought to book in this way,” said Mrs. Denison,
recovering herself, and speaking in a louder voice. “You cannot be
ignorant of the stories about you, and you cannot be surprised that I
don’t think you a fit person to—to be a friend to—to young girls.”
There was a pause, which Mrs. Denison found very awkward. She
stood with one hand upon a small octagonal table, feeling very
anxious that this most obnoxious visitor would either go or give her
an opportunity of going. Vernon, on his side, stood perfectly still
before her, staring at the floor, not with the shamefaced look of
remorse and guilt, but with an expression of painful and earnest
thought. At last he raised his head, and his black eyes, full of
passion and fire, met her own cold grey ones steadily.
“You have heard that I caused the disappearance of a girl ten years
ago?” said he, not abruptly, but with grave deliberateness.
“Er—yes—something—yes—of the sort,” answered Mrs. Denison,
taken aback.
“And on sufficiently good authority to warrant your considering it
true?”
“On the very best authority. I never act on any other,” said the lady,
hastily.
Vernon looked perplexed, and his tone grew a little more diffident as
he continued—
“Then why not have spared me the humiliation of this reception? Just
two lines sent by the stable boy would have been enough, and you
may be sure I should never have troubled you with what, I hope, has
been a painful interview to you.”
Vernon said “hope,” and even put a slight emphasis on the word, as
he had a suspicion that his hostess was ill-natured enough to have
found some enjoyment in his discomfiture. With a ceremonious and
dignified bow he was passing her on his way to the door, when a
genial voice startled them both, and Mr. Denison entered.
Not being a man of specially quick perceptions, the new comer did
not at once see that anything was wrong. He seized Vernon by both
hands, welcomed him in warm words, and with apologies for having
been absent on his arrival.
“And where’s my Olivia?” he went on, turning to his wife, now
observing for the first time the unpromising frown on that lady’s face,
and believing that his daughter’s neglect was the cause. “She should
have been here to help you entertain Mr. Brander.”
Mrs. Denison began to say something inarticulately, but Vernon, in a
clear and deliberate voice, took the words out of her mouth.
“You do Mrs. Denison injustice. Judging from the manner in which
she has entertained me, I should think she is not only able, but that
she prefers, to do without any assistance.”
Mrs. Denison looked both confused and alarmed, as she stammered
something about Mr. Brander’s having misunderstood her. For her
husband, like many other easy-going men, was subject to occasional
fits of passionate violence, which, for a woman of Mrs. Denison’s
cold and somewhat stodgy temperament, had peculiar terrors.
“Misunderstood!” cried he, in an ominous tone of surprise and
perplexity.
“Misunderstood what?”
“I think the misunderstanding was on the lady’s side,” said Vernon,
very calmly, moving a step nearer the door. “For if Mrs. Denison
really thought that I could comfortably partake of her hospitality after
being accused by her of unspecified crimes, she made a mistake
which I must now beg to leave her leisure to recognize.”
Without giving Mr. Denison, who had grown during this speech
absolutely livid with anger, time to answer him, Vernon Brander
hurried out of the room and out of the house.
But Mr. Denison’s outbursts of passion, if violent, were short lived.
After having inveighed for a few minutes furiously against woman’s
talkativeness and woman’s indiscretion, he allowed himself to be
talked round by his wife, into believing that what little she had said to
the Reverend Vernon touching his former delinquencies, he had
brought upon himself by a very impertinent expression of his
admiration for Olivia. Being at heart a man of peace, and unable to
retain displeasure with any one for long, Mr. Denison had subsided
into an uneasy and conscience-pricked silence on the subject, when
Olivia’s footsteps, bounding through the hall with the agility of youth
and high spirits, startled both husband and wife.
The girl sprang into the room like a flash of sunshine, but being far
more acute than her father, the first glance from his face to that of his
wife showed her that something was wrong.
“Where’s Mr. Brander?” she asked abruptly, already with a dash of
suspicion in her tone. “Lucy told me he’d been here nearly half an
hour.”
Mr. Denison walked away to the nearest window without speaking;
Mrs. Denison leaned back in the easy chair which she was
occupying with an assumption of easy dignity meant to conceal the
uneasiness which she felt. For to displease Olivia seriously, much as
the elder woman might affect to ignore the girl’s feelings, was a very
different thing from displeasing her good-tempered father.
“Mr. Brander has been and has gone,” said Mrs. Denison, with an air
of offended dignity. “He has proved himself unworthy the honor of
being admitted as a friend into my family, and I never wish to hear
his name mentioned again.”
“You don’t think I’m to be satisfied like that,” said Olivia, very quietly.
Then she stood, with hands clasped and passionate, earnest eyes,
gazing at her step-mother’s doughy face with a steadfastness which
caused that lady to “fidget” uneasily, and thus to destroy the effect of
her efforts at dignified composure.
“You’re forgetting yourself strangely, Olivia, to speak to me in that
manner. I am mistress here, and I am not going to be dictated to by a
chit of a girl.”
“You have said something, done something, to send him away; I am
sure of it,” said the girl with breathless earnestness, not heeding her
step-mother’s fretful protest. “I will know what it is; I have a right to
know. Papa,” she went on, turning towards her father entreatingly,
and speaking in a voice that grew softer the moment she addressed
him, “you know Mr. Brander has been kind to me, most unselfishly,
disinterestedly kind—and just when I wanted help and kindness. You
would not let him be rudely treated, would you? You would never
allow your guest to be insulted, I am sure. Tell me what has
happened; I must know. Do tell me; do satisfy me. I am not curious; I
am miserable until I know.”
She had crossed the room to him, put affectionate hands on his
shoulders, and was looking into his face with tender pleading, far
more irresistible even than his wife’s peremptory reasoning had
been. He could not look her in the face, but frowned, and made
feeble and futile attempts to get rid of the clinging fingers. Mrs.
Denison’s hard voice then struck upon their ears.
“Really, Edward, you’re not going to allow yourself to be talked over
in that way, I hope. Surely you and I are the best judges as to who
are, and who are not fit acquaintances for our children. And when
the wife of the vicar of the parish herself warns me that such and
such a man is a criminal of a sort not fit to be admitted into a decent
house, I don’t think any one can dispute that we have authority for
what we do.”
“The wife of the vicar! Mrs. Brander!” exclaimed Olivia in
bewilderment. “She told you that about her brother-in-law?”
Mrs. Denison did not answer. She was ready to bite her tongue out
for her indiscretion in mentioning her informant’s name. For she
knew Olivia’s impulsive nature, and was very much afraid that the
girl would get her into trouble with the vicar’s wife, with whom she
was anxious to stand well. For Mrs. Brander’s well-bred simplicity of
manner, and a certain air of being queen of the district which years
of homage had given her, had made a strong impression on the ex-
governess. Olivia read the truth in her step-mother’s confusion, and
a new spring of anger bubbled up in her heart.
“The wicked, treacherous woman!” she panted, scarcely aloud, but
with great vehemence. “He shall know who are the friends who
spread these stories about him.”
She was turning impulsively towards the door, drawing on as she did
so, one of the gloves she had taken off, when Mrs. Denison, with
unaccustomed agility, sprang up from her chair and laid a heavy
hand on the girl’s arm.
“Where are you going?” she asked, peremptorily, with much anxiety.
Olivia looked down at her face with a resolute expression, which
made her step-mother’s hands tingle to box her ears.
“I am going to find Mr. Vernon Brander, to tell him of the slanders that
are being spread about him and who spreads them, and I am going
to apologize most humbly for the treatment he has received in this
house this morning.”
If Olivia had trusted herself for another minute in Mrs. Denison’s
clutches, the last ray of that good lady’s self-restraint would have
been torn away, and she would have recalled her old methods of
school room rule by bringing her plump hand in sharp contact with
the girl’s cheeks. But Olivia was too quick for her. With an agile twist
of her imprisoned arm she freed herself, and shaking her head at her
father, who was crossing the room to follow her, she left the room
even more rapidly than Vernon Brander had done.
Olivia flew along the road towards St. Cuthbert’s as if pursued. The
thought that the man who had done so much both to help and
protect her should have been exposed to the vulgar insults of the
tyrant of her father’s household threw her into a frenzy of anger and
humiliation for which she found no balm. With her indignation against
Mrs. Meredith Brander, on the other hand, there mingled an
unacknowledged consolation. She did not like that lady; she was
also unconsciously jealous of her strong hold upon her brother-in-
law. Therefore the discovery of Mrs. Brander’s perfidy, which could
not fail to weaken that hold, had an element which was not
unwelcome. But to do the girl justice, this selfish feeling was in very
small proportion to the passionate wish to make some amends to
him for the indignity he had just suffered.
It has been a dull morning and now the rain was beginning to fall,
and to envelope the hills far away on the left with a haze which by its
density threatened something worse than a light shower. In her
impulsive eagerness to start on her errand of consolation, she had
not thought of the mundane precaution of taking an umbrella, and
although she was now not too much absorbed to regret the
omission, she was far too impatient to go back. As the rain fell faster
she began to run, and when she came in sight of the ruinous church,
standing still far away in the valley below her, partly hidden by the
gaunt and cheerless Vicarage, she had to pause for breath, although
by that time her clothes were wet through. Through the veil of rain
she caught sight of a man who was making his way towards St.
Cuthbert’s by a shorter path, over the meadows and through the
straggling trees which at this point skirted the hill on the south side of
the valley. It must be Vernon Brander, she felt sure, returning
passionately angry or deeply humiliated, from his unlucky visit to the
farm.
Olivia wanted to overtake him before he could reach his house: so
with her usual impetuous rashness, she broke through the hedge on
her left, ran, tumbled, and slipped down the hill, which was slippery
with wet grass, scrambled through the damp, dead underwood which
grew between the trees at the bottom, and, running for the rest of the
way, got into the lane leading to the church, and, turning the last
sharp corner in a brilliant spurt, ran into the man she was pursuing
as he leaned against the churchyard gate.
And it was not Vernon Brander after all!
The man had turned, hearing the rapid footsteps behind him, and the
change in the girl’s face, as she learnt her mistake, was far too
pronounced for him not to see easily that she was disappointed.
“I’m the wrong man, missee, I’m afraid,” said he good-humoredly,
and in a manner perfectly free from offence.
Olivia knew that this was the new tenant of Rishton Church Cottage;
she had seen him on the previous Sunday, not indeed inside the
church, of which he had confessed to the vicar a frank abhorrence,
but leaning over the low wall of his garden to watch the worshippers,
as they left the building, with half-shut, critical eyes.
“No,” said she, apologetically; “I thought it was the vicar.”
A curious look, partly of interest and partly, as it seemed to her, of
pity came over his face.
“The vicar of this rat run?” he asked, with a nod of his head in the
direction of the church.
“The Vicar of St. Cuthbert’s,” answered the girl with some dignity.
Her ideas on the subject of conversation with strangers were strictly
conventional, but besides the universal interest and curiosity which
the mystery surrounding the new comer excited, she felt a sudden
conviction that the attraction which brought him to this remote
neighborhood was not unconnected with Vernon Brander.
The stranger gave a sort of grunt, and nodded significantly.
“I thought so,” said he.
Olivia turned away, with a deep flush in her cheeks, much vexed with
herself for having given the man an opening for a remark which
seemed highly impertinent. She was making boldly for the Vicarage
when she heard the stranger’s voice again. He had followed and
was walking beside her.
“Look here, Miss Denison,” he began, in a serious and respectful
tone, “although I am a stranger to you, you are not one to me, for I’ve
studied you since I’ve been in this neighborhood, as I’ve studied all
the rest of my neighbors. And if I thought of them all as I do of you, it
would be better for some of them.”
Olivia turned suddenly towards him, and stopped, impressed by his
tone, and filled with dread of what was coming.
“Don’t be frightened,” he continued, in a voice which, for the rough
man, was almost gentle. “You’re a fine, high-spirited, generous girl,
and I want to be able to say to you that I will never harm you nor
yours.”
“You want to be able to say it!” she exclaimed in bewilderment.
“Yes. As long as you remain Miss Denison I can say it, but if you
were to shut your ears to everybody’s warnings and marry the Vicar
of St. Moulder-in-the Hole here, I couldn’t.”
“Why, who are you?” cried the girl, in a tremulous voice.
“Ned Mitchell, brother to Nellie Mitchell, who was done away with
here ten years ago. And I’m here to make the man who murdered
her swing for it!”
 CHAPTER XIV.
Olivia Denison was by no means a nervous or weak-minded girl.
On learning that the man who stood before her was the brother of
Nellie Mitchell, she did not scream or stagger back, or give any
outward sign of the shock she felt, except to bite her lips, which had
begun to tremble and twitch, as she bowed her head in
acknowledgment of the information. But, none the less, she was
instantly possessed by a much greater terror than if this unexpected
avenger had been a fierce-looking personage with flashing eyes and
a melodramatic roll in his voice. She felt that there would be no
softening this hard-headed colonist, who took the punishment of his
sister’s betrayer as “all in the day’s work,” and announced his
intention of getting him hanged with the same dispassionate decision
with which he would have resolved on the sale of a flock of sheep.
And at the same time she felt for the first time fully conscious that
even the absolute knowledge of Vernon Brander’s guilt would not
suffice to stifle her interest in him.
Quietly as she took his sensational announcement, Ned Mitchell was
shrewd enough to know that the young lady was greatly shocked by
it, and her bearing filled him with genuine admiration. But his first
attempt to soften the blow was scarcely well worded.
“Come, Miss Denison, there are as good fish in the sea as ever
came out of it, and a young lady of your spirit is too good to waste
half a sigh on any man, let alone a parson. There’s nobody fit to
mate with you in this played-out old country; what you want is a lad
who can sit a buckjumper, or ride five hundred miles without a wink
of sleep except what he gets in the saddle. That’s your sort.”
“Is it?” said Olivia tranquilly. “Perhaps so. But I assure you, Mr.
Mitchell, I can exist a few more years without a mate at all, and that it
is no frantic desire to get married which makes me anxious to see
one of my friends cleared of a charge of which I believe him to be
innocent.”
“Well said. That’s what a friend should believe. But if your friend has
quite a free conscience about St. Cuthbert’s churchyard and
anything that may ever have taken place in it, can you suggest a
reason for the gate’s being always locked?”
“I suppose it is to prevent the sheep getting in,” said Olivia, regretting
the feeble suggestion the next moment.
“Certainly the sheep can’t pick a lock, but, then, neither could they lift
an ordinary latch.”
“Do you suppose that no churchyard is ever kept locked unless a
murder has ever been committed in it?”
“No. But I think it strange that since I have been here, prowling
about, let us say, not only has the gate been mended where it had
grown weak in one of the hinges, but two breaches in the wall, by
which one could have got into the churchyard without the help of the
gate, have been repaired.”
Olivia glanced towards the place where she had got in over the
broken wall on a former occasion. The gap had been stopped up,
and some of the earth underneath on the outside had been carted
away to make a forced entrance more difficult.
“Well,” said she, her cheeks flushing, “and is there anything singular
in the fact of a vicar’s having his churchyard wall repaired?”
“When the churchyard is so orderly and so beautifully kept as this
one?” added Mr. Mitchell, with a derisive laugh. “Yes, I think there is
something singular in it. And what makes it to my mind more singular
still is that when I congratulated the Reverend Vernon Brander on
these repairs he denied all knowledge of them.”
“Then he certainly knew nothing about them,” said Olivia, promptly.
Mr. Mitchell, for the first time, gave her a glance such as he was
accustomed to bestow on the ordinary run of women—a glance full
of resigned and lenient contempt.