Bessrawl Corporation Essay

1). Inventory on a lower floor U. S. GAAP, Bessrawl pile is allowed to report inventory on its balance bed cerement at lower of cost or market. commercialise in this case is defined as deputy cost ($180,000) with illuminate realizable cherish ($190,000) as ceiling and acquit realizable rank minus a normal profit ($190,000 $38,000 = $152,000) as a floor. appeal of inventory is $250,000. Since market is lower than cost, inventory is written down to replacement cost of $180,000 and report on the companys balance sheet at December 31, 2011. This also led to a loss of $70,000 reported on the companys income pedagogy for December 31, 2011.However, infra IFRS, Bessrawl slew had the option to report inventory on its December 31, 2011 balance sheet at lower of cost of $250,000 and net realizable value of $190,000. Since the net realizable value is lower than the cost, the company would have reported $190,000 on its balance sheet for December 31, 2011 and a loss of $60,000 on its income statement for the same period. Thus, downstairs IFRS, Bessrawl Corporation income would be $10,000 larger than reporting to a lower place U. S. GAAP, stockholder equity allow also be $10,000 larger under IFRS than under U. S.GAAP. 2). Building Under U. S. GAAP, Bessrawl Corporation reported wear and tear put down of $100,000 each on 2010 and 2011 financial statements. Depreciation expense = ($2,750,000 $250,000)/25 yrs = $100,000/yr. Under IFRS recap model, the depreciation expense on the building was $100,000 in 2010 and the carrying value was $2,650,000 beginning 2011. The building was then revalued to $3,250,000, at the beginning of 2011 resulting in revaluation surplus of $600,000. The depreciation expense for 2011 would be ($3,250,000 $250,000)/24 yrs = $125,000.So, under IFRS, Bessrawl Corporation would incur additional depreciation expense of $25,000 in 2011, leading to little income than under U. S. GAAP. Stockholders equity in 2011 will be $575,000 larg er under IFRS than under U. S. GAAP. This is equal to the revaluation surplus of $600,000 less the additional depreciation expense of $25,000 in 2011 under IFRS, which will reduce contain requital. 3). intangible Assets Under U. S. GAAP, an asset is impaired when its carrying come exceeds the future cash flows (undiscounted) anticipate to arise from its continued use and disposal of the asset.The differentiate acquired in 2011 has a carrying amount of $40,000 and future expected cash flows are $42,000, so it is non impaired under U. S. GAAP. Under IFRS, an asset is impaired when its carrying amount exceeds its recoverable amount, which is the greater of net selling impairment and value in use. The brands recoverable amount is $35,000 the greater of net selling price of $35,000 and value in use (present value of future cash flows) of $34,000. As a result, an impairment loss of $5,000 would be recognized under IFRS. IFRS income and retained earnings would be $5,000 less than U.S. GAAP income and retained earnings. 4). Research and victimization Costs Under U. S. GAAP, look for and growing be in the amount of $200,000 would be expense and recognized in determining 2011 income. Under IFRS, $120,000 (60% of $200,000) of research and development costs would be expensed in 2011, and $80,000 (40% of $200,000) of research and development costs would be capitalized as an intangible asset (deferred research and development costs). So the IFRS-based income at December 31, 2011would be $80,000 larger than under U. S. GAAP income.And since the parvenue product has not been brought to market, there is no amortization of the deferred research and development costs under IFRS in 2011. 5). Sale-and-Leaseback Under U. S. GAAP, the larn on the sale-and-leaseback (operating lease) is deferred and amortized in income over the life of the lease. With a lease term of five years, $30,000 of the $150,000 gain would be recognized at December 31, 2011 and $30,000 each wo uld be recognized in 2009 and 2010, resulting in a cumulative amount of $90,000 retained earnings at December 31, 2011.Meanwhile, under IFRS, the entire gain on the sale-and-leaseback of $150,000 accounted as an operating lease was recognized immediately in income in 2009. This will result in an increase in retained earnings of $150,000 in that year. No gain would be recognized in 2011. As a result, IFRS income at December 31, 2011 would be $30,000 smaller than under U. S. GAAP income, scarce stockholders equity at December 31, 2011 under IFRS would be $60,000 larger than under U. S. GAAP.