Since 1980, Creative Architects and Engineers (CAE) has been providing high-quality design services to property developers, city governments, and others in need of large- scale designs for office buildings, condominiums, art galleries, concert halls, bridges, train stations, and so on. The company has been successful largely due to the ability of its staff to generate designs that are functional yet attractive, and cost-effective while environmentally sustainable. The company has five office locations with a total staff of about 500, and is publicly listed.
Top management has always been attuned to the needs to foster and maintain the creativity and expertise of its staff, as that is the key to the company?s success. To stay at the forefront of human resource management practices, the company has recently introduced a number of enhancements:
? The company has undergone a complete review of its workplace to assess the ergonomics of its office furniture and fixtures. As a result of this review, the company spent $2 million to replace existing equipment that has a carrying value of $800,000. The company rents the office space using long-term leases, with typical lease terms of 10 years.
? Following the practices of other creative companies such as Google and Electronic Arts, the company opened up an area in each office location for relaxation/entertainment. This space includes sound isolation rooms, television sets, computer game consoles, wireless headsets, and tables for pool, foosball, and air hockey. The modification to the offices cost $1.5 million. Management believes these facilities contribute to the creative process of its staff.
? The company also implemented a health and wellness program. This program pro-vides a reimbursement of up to $2,000 per employee toward membership fees at fitness centres and purchase of recreational equipment and clothing. Management estimates that this program benefits the company $1,500 per employee in terms of the reduction in the number of sick days alone, not counting the additional benefits of higher productivity.
? CAE encourages its staff to engage in professional development and continuing education by providing tuition reimbursements of up to $10,000 per year. Employees must remain employed at the company for the two subsequent years; otherwise, the employee must repay the funds to CAE.
a. Discuss the accounting issues related to the above enhancements to CAE's human resource practices.
b. Compare the accounting treatments that you find to be appropriate for the four programs. Evaluate the accounting standards that led to those similarities and differences.
This question was answered on: Jul 11, 2017
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