Posted by & filed under Accounting Principles, Financial Accounting.

Description: The Toronto rental market is featuring an interesting switch in demand patterns. Younger renters were often prepared to put up with cramped apartments and high rents to live close to the action in the downtown. But with Covid-19 shutting down so much of the city’s social life in restaurants and bars, renters are heading for bigger (and cheaper) spaces outside the city’s core. As the article says, when you’re working at home all the time, you may not care to sleep in your office.

Date:  November 8, 2020

Source:  cbc.ca

 Link: https://www.cbc.ca/news/canada/toronto/condo-rental-toronto-housing-treb-market-1.5793619

Discussion points:

1) Do you know anyone who has made a shift from a city center to outside the downtown in recent months? What impacted their decision?

2) Do you think that there will be a return of renters to the downtown when the Covid challenges subside?

3) Wiley’s Financial Accounting: Tools for Business Decision-Making provides a five-step model for recognizing revenue under IFRS (see pages 4-6 and 4-7). Discuss with your classmates how a rental company would apply the five steps in recognizing revenue from apartment tenants.

8 Responses to “Rental Market Switch”

  1. Emily Mitchell, Jean-Luc Melanson, Noah McCarthy

    1) My aunt lived in Halifax but during the pandemic she moved to NB. With the perks of the city such as shopping, restaurants, and always having something to do being shut down during the pandemic she wanted to move away and get a bigger place with hopes of entertaining in her house with her friends as opposed to going out and putting herself at risk.

    2) We do not think that there will be a return of renters to the downtown even when COVID is over because people will realize that it is nice to be able to relax and not always have to deal with the busy city life. We also doubt that city life will ever be the same as it was before COVID, which may cause people to stay away from the city.

    3) Using these 5 steps, a rental company would 1) tell the tenant that there is a contract involved 2) explain the obligations in the contract 3) state the price of rent 4) put the rent price in the contract 5) collect rent when due

    Reply
  2. Emile Wold, Andrew Warner, Katherine Waller

    1) I do know a friend who made a shift from downtown Toronto to the countryside after Covid-19. The person made the decision after knowing that stores and restaurants were closing due to covid-19. My friend valued cheaper rent over location and centrality

    2) Yes, when Covid-19 calms down, immigrants, and students will increase the demand for a place to stay, which will increase the rent. People like Stephen Tyson will also have a reason to move back because his workplace will be open again.

    3) Applying the 5 steps, a rental company would:

    1 inform the renter that a contract is in place
    2 Inform the obligation that are stated in the contract
    3 Inform the rent price
    4 Written statement of what to pay for rent
    5 Collect rent receivable

    Reply
  3. Weiting Li, Xiaoming Li, Wenting Zhang, Naikang Chen

    1) Do you know anyone who has made a shift from a city center to outside the downtown in recent months? What impacted their decision?
    – Yes. One of our graduated friends used to lived just besides the company he worked in, but he made the decisions to move because of a lower rent and to live with other friends so that loneliness won’t be overwhelming during the COVID period.
    2) Do you think that there will be a return of renters to the downtown when the Covid challenges subside?
    – Yes. After the COVID, routines in schools and companies should be back to normal and thus requiring people to show up on time in person. Those who moved may no longer enjoy the benefit of staying home but have to move closer to the companies/schools unless they can tolerate the long hours of transportation.
    3) Wiley’s Financial Accounting: Tools for Business Decision-Making provides a five-step model for recognizing revenue under IFRS (see pages 4-6 and 4-7). Discuss with your classmates how a rental company would apply the five steps in recognizing revenue from apartment tenants.
    1. Identify the contract with customer: Inform the renters that a contract is ready to be signed;
    2. Identify the performance obligation in the contract: List detailed description of the responsibilities in the contract and make sure the renters have no question about any of them;
    3. Determine the transaction price: Inform the renters about the price;
    4. Allocate the transaction price to the performance obligation in the contract: Make sure both the landlord and the renters know what is covered under the rental price;
    5. Recognize revenue when the entity satisfies a performance obligation: Collect the rental on a specific day each month.

    Reply
  4. Samuel power, Cole Peters, Zhixiang Qi

    1. Yes, my friend Seb recently decided to move from Halifax to Greenwood, NS recently. This decision was mostly made due to the high cost of living downtown now not being worth it as amenities that drew him there in the first place were no longer available and cost of living was no longer worth it.

    2. We believe that once Covid comes to an end many people will return to cities because risk of contracting Covid will decrease and amenities will once again become available.

    3. To apply these 5 steps rental companies would have to:

    1-Tell the tenant that a contract is in place
    2- Discuss and explain to the tenant what obligations they have in the contract
    3- Disclose the price of rent
    4- Apply the rent price in the contract
    5- Collect the rent payments

    Reply
  5. Jacob Myra, Efe Onal, Akhilesh Penta

    1. Yes, one of our friends Sam was living downtown Halifax but moved to a more rural suburb in the outer city that offered a much more spacious living arrangement for a slightly cheaper price. He made this decision because he was working from home now and did not need to live in a small apartment that was close to where he was working at the time. He is happy with his decision as he now has an office set up in his new place and has room to have a solid work station that is not right next to his bed an also has room to accommodate friends and family. He also has a nice quiet neighbourhood where he can get outside his house and get some well needed exercise.

    2. we believe that once covid comes to an end there will be a shift back to the desire for inner city apartments because people will be looking for living arangement close to work and other ammenities located in the downtown area.

    3. Applying 5 steps a rental company would use:

    1) inform the renter that there is a contract associated with renting and must be signed.
    2) Overview the obligation that are stated in the contract to the potential renter.
    3) State the price of rent
    4) Properly insert the price of rent in the contract and make sure that both parties know what is included in this price
    5) Collect rent payments on specified day of payment in contract.

    Reply
  6. Nicolas Gauvin, David Elsinga, Ashley French

    1) My cousin made the transition from downtown Montreal to a more suburban area in the outskirt of Montreal following his jobs transition to work remotely. He was told that after the pandemic is over most employees will be allowed to continue to work from home permanently. He decided to make the move due to rent being much more affordable and the commute to work will no longer be a factor now that he is working remotely.
    2) We believe renters will return to the downtown following the pandemic and once the economy has returned to pre-pandemic levels. However, the demand for downtown rentals could possibly decrease permanently now that it seems organizations are looking into remote work options for their employees permanently.
    3) The five steps a rental company would perform are as following:
    1. Advise the tenant that a contract has to be established. Most likely in the form of a lease agreement.
    2. Explain and insure that the tenant is aware of the obligations listed in the contract/lease.
    3. Determine the price of rent and inform tenants.
    4. Include the agreed-upon rental price in the obligations of the lease/contract.
    5. Collect the rent from the tenant when due as indicated on the lease/contract.

    Reply
  7. Pushkaraj Jadhav, Su Young Kwon, Justin Leblanc

    1) Yes, one of our friends decided to stay in Sackville even though they are enrolled in a university in Vancouver as they realized that most of the stores in cities have shut down due to COVID and it would save them a lot of money as rent is more affordable in Sackville as compared to downtown Vancouver.

    2) Our group believes that renters will return back to bigger cities, as the stores will reopen and it will be a more convenient access to schools/universities, jobs, and amenities located in downtown. However, not everyone would prefer to shift back if the organizations decide to have remote work permanently.

    3) Applying the 5 steps, a rental company would:

    1 Inform the tenent that a contract is in place
    2 Explain the obligations to the tenant and make sure they are aware of them.
    3. Determine the rent price
    4 The rent price is included in the lease/contract
    5 Collect rent payment on the due date as stated in the lease/contract.

    Reply
  8. Dylan Corkum, Chacha Dominion, Adrianna Dewar

    Data switched from ‘The End of Double Cupping’ as per Professor White due to data entry error

    1) We are indeed Tim Horton’s fans in our group. They have good coffee and donuts, but we do not have a Tim’s on the Mount Allison Campus.
    2) We believe that Tim’s considered the savings associated with ending double cupping by being able to save upwards of 200 million cups annually. Tim’s also could have thought about being socially and environmentally responsible, while saving money.
    3) If we purchased a franchise like Tim Horton’s, we would place it under Intangible Assets on our balance sheet. The franchise acts like a license, is an asset to us, but is not tangible. We would amortize it if it had a limited useful life, and amortize it over the shorter period between either legal life or useful life.

    Reply

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