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IFRS

• Substantially similar to U.S. GAAP


• Significant differences do exist.
• An effective way to understand IFRS is to compare to U.S. GAAP.

Areas with significant differences


I. Inventory (IAS 2)
II. Intangible Assets (IAS 38)
III. Property, Plant, and Equipment (PP&E) (IAS 16)
IV. Impairment of Assets (IAS 36)
V. Leases (IAS 17)

Recognition and Measurement: Some background


Match the terms below with a definition:
Current market value, Present value of future cash flows ~ Fair Value, Historical cost , Net realizable value, Current (replacement) cost
Amount paid to acquire an asset or, for liabilities, the amount received when the obligation is incurred.
Amount of cash (sometimes the present value) minus collection and other costs incurred.
Amount needed to acquire an equivalent asset.
Amount of cash received from an immediate sale of the asset.
Amount of cash to be received, discounted at the appropriate interest rate.

Comparisons of IFRS and US-GAAP: Using Health Products & Services Company ‘A’ as an Example

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I. Valuation of Inventories
IFRS: IAS 2 U.S. GAAP: ARB 43

Key Points: Key Points:

• Inventories are recognized at the • Inventories are recognized at the

• Write-downs on inventories • Write-downs on inventories

• Using LIFO inventory costs is • Using LIFO inventory costs is

Inventories are recognized at the lower of cost or net realizable value, Inventories are recognized at the “lower of cost or market”. In the
which is the estimated selling price less any costs of completion and phrase “lower of cost or market”, the term “market” means current
disposal. (IAS 2.9) replacement cost, whether by purchase or by reproduction, but is
Company Policy: limited to the following maximum and minimum amounts:
The FS-item “Allowances on inventories” (FS-items: 11342101,
11353101) includes write-downs to replacement cost as well as write - Maximum: the estimated selling price less any costs of completion
downs due to obsolete or damaged product. Please contact the and disposal, referred to as net realizable value.
consolidation department if the part of the reserves that refers to write- - Minimum: net realizable value less an allowance for “normal”
downs to replacement costs is above 200,000 US-$. profit. Normal is based on the amount of work necessary to
complete the product.
Write-downs on inventories must be reversed, if the net realizable value The write-down of inventories may not be reversed.
has increased, but the reversal is limited to the amount of the original
write-down.

Cost formulas for inventory costs: LIFO (Last in first out) is prohibited. Cost formulas for inventory costs: LIFO (Last in first out) is permitted.
(IAS 2.25). This formula assumes that the inventories that were purchased or
produced last are sold first.
Company Policy:
For Health Products & Services Company A, this difference is not
relevant, as inventory costs are determined by using the average or the
first in, first out method (inventories that were purchased or produced
first are sold first).
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Demo: Inventory
ABC Inc. has the following inventory item on hand at 12/31/Y1. Record the entry on 12/31 for Y1 &Y2 to reflect the price adjustment.
12/31/Y1   IFRS US
Historical cost 1,000   Cost Cost
Replacement cost 800   Replacement cost
Estimated selling price 880  
Estimated costs to complete and sell 50  
Net realizable value 830   NRV Ceiling
Normal profit margin— 15% 124.50
Net realizable value less normal profit margin 705.50 Floor
Designated Market Value
Valuation basis  
Adjustment, See T-Account Analysis below  
 
12/31/Y2   IFRS US
*New Cost (see notes below)   Cost Cost
Replacement cost 900   Replacement cost
Estimated selling price 980  
Estimated costs to complete and sell 50
Net realizable value 930 NRV Ceiling
Normal profit margin— 15% 139.50  
Net realizable value less normal profit margin 790.50   Floor
  Designated Market Value
Valuation basis  
Adjustment  

*For inventory cost on 1/1/Y2


IFRS US
The historical cost of $ is used in applying the lower of cost or net The inventory write-down at the end of Year 1 establishes a new cost of $
realizable value rule over the entire period the inventory is held. is used in subsequent periods in applying the lower of cost or market rule.
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T-Account Analysis on Inventory
Inventory IFRS US
01/01/Y1
Adjustment
12/31/Y1
Adjustment
12/31/Y2

Entries to adjust inventory value:


12/31/Y1-IFRS Dr. Cr. US Dr. Cr.
Inventory Inventory

12/31/Y2-IFRS
Inventory   Inventory

E1: Inventory Valuations


To determine the amount at which inventory should be reported on the 12/31/Y1 balance sheet, Monroe Company compiles the following information
for its inventory of Product Z on hand at that date:
Historical cost $ 20,000
Replacement cost $ 14,000
Estimated selling price $ 17,000
Estimated costs to complete and sell $ 2,000
Normal profit margin as % of selling price 20%

The entire inventory of Product Z that was on hand at 12/31/Y1 was completed in Year 2 at a cost of $ 1,800 and sold at a price of $ 17,150.

Required:
a. Use the information provided in this chapter related to the accounting for inventories to determine the impact on Year 1 and Year 2 income related to
Product Z (1) under IFRS and (2) under U. S. GAAP.
b. Summarize the difference in income, total assets, and total stockholders’ equity using the two different sets of accounting rules over the two-year
period.
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a. How much Inventory Loss is in Y1 and COGS in Y2.
IFRS U.S. GAAP
Historical cost Historical cost
Estimated selling price Replacement cost
Costs to complete and sell
Net realizable value Net realizable value
Inventory loss (gain) 5,000 Normal profit margin 20%
NRV - profit margin
Market value
Inventory loss (gain) 6,000

*T-Account Analysis on Inventory


Inventory IFRS US
01/01/Y1
Adjustment
12/31/Y1
Additional cost
*12/31/Y2

b. Impact on Accounts and Financial Ratios for Y1 and Y2


Account / IFRS > = < US The financial ratio The company appears…
Financial Ratio under IFRS is…
Year 1 Inventory loss
Asset
Net Income
Stockholders’ equity
Current ratio (=CA/CL)
EPS
Debt-equity ratio
Year 2 *Cost of goods sold
As all inventory are sold in Y2, IFRS has higher COGS in Y2 and hence, signs on NI and SE reversed in Y2.
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LIFO REPEAL-IMPACT ON TAXES

Example 1: (See Figure I and II, next page) A corporation elected LIFO inventory accounting in 1975. From 1975 to 2008 the company
experienced inflation in its inventory equal to CPI of 224%. Because the company did not have to pay current taxes on the inventory holding
profits, it was able to use the cash profits to maintain its unit investment in inventory and invest in other income producing assets while
maintaining status quo terms with its vendors and static borrowings from its lenders. If the company were forced to recapture the inventory profits,
it would have a current federal and state tax bill of approximately $10.6 million, more than ten times the equity value of the company. In
order to satisfy the tax liability, the company would need to borrow money from its lenders if it could, infuse more cash equity capital if the owners
had it to invest, sell productive assets and cut expenses or some combination of the above. In this example, the value of the tax liability is ten times
the total equity value of the company. Even if the tax burden would be spread over a limited number of future years this transfer of capital from the
private sector to the government would contract or prevent growth in these companies.

Example 2: A $35 million privately-owned manufacturing company in New Jersey employs 150 people to design, manufacture and
distribute its products world-wide. This company has consistently used the LIFO method of inventory accounting for over 35 years.

The nature of this business requires keeping approximately $8 million of inventory on hand at all times, due to the replacement or “spare parts”
needed to satisfy the multi-year nature of its customers’ contracts. They manufacture a highly engineered, technical array of products that are
customer and application specific. The products are of a very durable nature and can be found in some of the most extreme environments in the
universe, literally. Nevertheless, customers regularly request replacement units or outright rebuilding of previously sold units. Maintaining the
LIFO based inventory values more closely matches the timing of production with the ultimate shipping point in time. LIFO in this way helps to
better match current selling prices with current inventory costs, since the bulk of purchases and manufacturing in any current period do not end up
“on the shelf” but instead, are shipped according to current customer specific requirements. LIFO positively impacts that process on several levels.

If LIFO were repealed today, this New Jersey Company would be required to pay retroactive taxes on inventory held since 1973, creating a tax
bill of approximately $1 million. Since this is a small, privately held company, the only way to pay this tax bill would be to borrow capital or cut
business investment. Either alternative would severely impact the company’s ability to continue operating at current levels, ultimately requiring a
reduction in employment levels.

It should also be noted that this current LIFO vs. FIFO adjustment has slowly built up over the last 35 years. Hence the impact on any one year’s
tax bill was relatively nominal. And at times, this impact has resulted in an increase in taxable income , with the most recent such increase taking
place just two years ago. The perception that LIFO is a one-way tax “loophole” is inaccurate.
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II. Research and Development Costs


IAS 38: Intangible Assets: SFAS 2:Accounting for Research and Development Costs

Key Points: Key Points:

• Capitalization of the development costs under certain conditions is • Capitalization of the development costs is

• The definition of R&D under IFRS and US-GAAP is

Deferred development costs are accounted for using the same rules as any other intangible. They must be
amortized over their useful life using a method that best reflects the pattern in which the asset’s economic
benefits are consumed.
Declining-balance, units-of-production, and straight-line methods are among the acceptable methods.
Amortization begins when the intangible asset is available for sale or use.

Major differences Major differences


Recognition: Recognition:
The following described capitalization of the development costs should be only applied when the R&D Development costs are
costs for a single and defined project (Company policy) exceed 1 million EUR (materiality criterion). generally
An intangible asset arising from the development phase of an internal project must be recognized (i.e. the
development costs must be capitalized) if all of the following criteria can be demonstrated cumulatively and
reliably:
1. The technical feasibility of completing the intangible asset;
2. The intention to complete the intangible asset and use or sell it;
3. The ability to use or sell the intangible asset;
4. How the intangible asset will generate probable future economic benefits;
5. The availability of adequate technical, financial and other resources to complete the development and to use
or sell the intangible assets;
6. The ability to measure reliably the expenditure attributable to the intangible asset during its development.
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Company policy
When we take the example of the development of a new PRODUCT, the required condition can be
demonstrated as following:
The technical feasibility can be proven when approximately 2,500 treatments have been successfully
accomplished.
The intention can be demonstrated within the scope of an approval of test samples (which is defined in SOP).
3. + 4. To demonstrate these requirements, business cases can be used, especially the part concerning the
market assessments. These business cases are presented and authorized in management meetings.
5. The availability of adequate financial resources is demonstrated by the existence of the R&D budget. The
other resources are proved by the existence of the know-how experts and the R&D locations.
6. The project related costs are collected and analyzed via SAP or via achievement descriptions prepared by all
employees involved in the development project.
A documentation file is available in order to fulfill the recognition criteria.
The differentiation between the research and the development phase is often not clear or especially the technical
and commercial feasibility of e.g. a new PRODUCT can be established only in a very late phase: but no
retroactive capitalization of development expenditures initially recognized as an expense is possible.

As soon as a product becomes available for use (e.g. by a market launch) no additional development costs will
be recognized.
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Demo: Development Costs
• Assume that Szabo Company Inc. incurred costs to develop a specific product for a customer in Year 1, amounting to $300,000. Of that amount,
$250,000 was incurred up to the point at which the technical feasibility of the product could be demonstrated. In Year 2, Szabo Company incurred
an additional $300,000 in costs in the development of the product.
• The product was available for sale on January 2, Year 3, with the first shipment to the customer occurring in mid- February, Year 3.
• Sales of the product are expected to continue for four years, at which time it is expected that a replacement product will need to be developed.
• The total number of units expected to be produced over the product’s four-year economic life is 2,000,000.
• The number of units produced in Year 3 is 800,000. Residual value is zero.

Discussion
In Year 1, $250,000 of development costs is an Asset or Expense?
$50,000 is recognized as an Asset or Expense?
To record development expense and deferred development costs: Dr. Cr.
Development expense
Deferred development costs ( intangible asset)
Cash, payables, etc
   
In Year 2, $ 300,000 of development costs is recognized as an Asset or Expense?
To record deferred development costs: Dr. Cr.
Deferred development costs ( asset)
Cash, payables, etc.

Amortization of development costs begins on January 2, Year 3, when the product becomes available for sale. Szabo Company determines that the
units-of- production method best reflects the pattern in which the asset’s economic benefits are consumed. Amortization expense for Year 3 is calculated
as follows:
Carrying amount of deferred development cost $350,000
Units produced in Year 3 800,000
Total number of units to be produced over economic life 2,000,000
% of total units produced in Year 3?
Amortization expense in Year 3?

The journal entry to record amortization of deferred development costs at 12/31/Y3


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E2: R&D Expenditures
In Year 1, in a project to develop Product X, Lincoln Company incurred research and development costs totaling $ 10 million. Lincoln is able to clearly
distinguish the research phase from the development phase of the project. Research-phase costs are $ 6 million, and development- phase costs are
$ 4 million. All of the IAS 38 criteria have been met for recognition of the development costs as an asset. Product X was brought to market in Year 2
and is expected to be marketable for five years. Total sales of Product X are estimated at over $ 100 million.

Required:
a. Use the information provided in this chapter related to the accounting for internally generated intangible assets to determine the impact on Year 1 and
Year 2 income related to research and development costs (1) under IFRS and (2) under U. S. GAAP.
b. Summarize the difference in income, total assets, and total stockholders’ equity related to Product X over its five- year life under the two different
sets of accounting rules.

a. IFRS v. U.S. GAAP


IFRS Classification Year 1 Year 2
Research costs
Development costs
Amortization expense

U.S. GAAP
Research and development

IFRS result in income before tax in Year 1 by


IFRS result in income before tax in Year 2-6 by

b. F/S impact
Ignoring income taxes, the following amounts on total assets and total stockholders’ equity under IFRS are higher or lower?
By the amounts below:
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6  
 
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III. Property, plant and equipment (PPE): Valuation


IAS 16 U.S. GAAP

Key Points Key Points


• In addition to the Cost Model as used under U.S. GAAP, IAS 16 allows • Cost Model: Recognizes the asset at cost less
the Revaluation Model subsequent to initial measurement and requires accumulated depreciation
that all assets within a class be further revalued periodically.

• Two Alternative Treatments


Treatment 1:
o Asset and accumulated depreciation are restated.
o Restated carrying amount equals current market value.
o The ratio of carrying value to gross carrying amount is
maintained.
• Treatment 2:
o Asset is first decreased by the amount of accumulated
depreciation.
Asset account is then increased by the amount of the revaluation
(current market value – carrying value).
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Demo: PP&E Revaluation
• Accumulated Depreciation upon Revaluation Assume that Kiely Company Inc. has buildings that cost $1,000,000, have accumulated depreciation of
$600,000, and a carrying amount of $400,000 on 12/31/Y1.
• On that date, Kiely Company determines that the market value for these buildings is $750,000.
• Kiely Company wishes to carry buildings on the 12/31/Y1, balance sheet at a revalued amount.

Treatment 1:
RESTATE both the buildings account and accumulated depreciation on buildings such that the ratio of net carrying amount to gross carrying amount
(or ratio of carrying value to cost) is 40 percent ($400,000/$1,000,000) and the net carrying amount is $750,000.
Original $ % Total/Balance Revaluation
Cost or $1,000,000 100%
Gross carrying amount
Accumulated depreciation 600,000 60%
Net carrying amount $400,000 40% $750,000
(net CA/cost ratio)

Journal entry would be made at 12/31/Y1


Building
Accumulated depreciation— building

Summary of Treatment 1:
Buildings, Net
Revaluation surplus

Treatment 2:
ELIMINATE accumulated depreciation on buildings to be revalued.
S1. To eliminate accumulated depreciation on building to be evaluated Balance
Buildings
Accumulated depreciation
S2. To reevaluate building
Buildings
Revaluation surplus
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Treatment of Revaluation Surplus/Loss
On the first revaluation after initial recording: (very straightforward)
• Increases are credited directly to a revaluation surplus in the
• Decreases are charged as an
At subsequent revaluations, the following rules apply:
• To the extent that there is a previous revaluation surplus with respect to an asset, a decrease first should be charged against it and any excess of
deficit over that previous surplus should be expensed.
• To the extent that a previous revaluation resulted in a charge to expense, a sub-sequent upward revaluation first should be recognized as income
to the extent of the previous expense and any excess should be credited to other comprehensive income in equity.

Demo: Treatment of Revaluation Surplus/Loss


Example: Assume that Kiely Company Inc. has elected to measure property, plant, and equipment at revalued amounts. Costs and fair values for Kiely
Company’s three classes of property, plant, and equipment at 12/31/Y1 and Year 2, are as follows:
Land Buildings Machinery
Cost $100,000 $500,000 $200,000
Fair value at 12/ 31/ Y1 120,000 450,000 210,000
Fair value at 12/ 31/ Y2 150,000 460,000 185,000
Revaluation Balance at 12/ 31/ Y2

12/31/Y1 PP&E Type Dr. Cr. Revaluation Balance


Land
Revaluation Land
Buildings
Revaluation Building
Machinery
Revaluation Machinery
12/31/Y2
Land
Revaluation Land
Buildings
Revaluation Building
Machinery
Revaluation Machinery
Revaluation Machinery
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E3 PP&E measurement subsequent to acquisition
Jefferson Company acquired equipment on January 1, Year 1, at a cost of $10 million. The asset has a five- year life, no residual value, and is
depreciated on a straight- line basis. On January 21 Year 3, Jefferson Company determines the fair value of the asset (net of any accumulated
depreciation) to be $12 million.

Required:
a. Determine the impact the equipment has on Jefferson Company’s income in Years 1–5 (1) using IFRS, assuming that the revaluation model allowed
by IAS 16 is used for measurement subsequent to initial recognition, and (2) using U. S. GAAP.
b. Summarize the difference in income, total assets, and total stockholders’ equity using the two different sets of accounting rules over the period Year
1–Year 5.

a. IFRS v. U.S. GAAP


Cost, 1/1/Y1 $10,000,000
Useful life 5 years
Annual depreciation $2,000,000
Book value, 12/31/Y2

IFRS Allowed Alternative


Fair value, 1/1/Y3 $12,000,000
Remaining useful life 3 years
Annual depreciation

Depreciation expense IFRS U.S. GAAP


Years 1 and 2
Years 3, 4, and 5
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b. F/S impact
Equipment (book value), End of Year in $Millions 1 2 3 4 5
IFRS
Beginning
Revaluation
Depreciation expense
Ending
U.S. GAAP
Beginning
Depreciation expense
Ending
Net Income on IFRS compared to U.S. GAAP is…
Asset on IFRS U.S. GAAP is…

Stockholders’ equity, End of Year 1 2 3 4 5


IFRS
Beginning
Revaluation
Depreciation expense
Ending
U.S. GAAP
Beginning
Depreciation expense
Ending
SE on IFRS is…
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Property, plant and equipment (PPE): Component Depreciation


IAS 16 U.S. GAAP

Key Points Key Points


• The component approach leads to a difference between IFRS and US-GAAP and it may be relevant for areas such as • Currently there is no
clinics and production units. The materiality criterion has to be proved before applying this approach (which might requirement which
lead to a different treatment compared to US-GAAP approach). accounts for separate
• The minimum level for applying the component approach is when the cost for a single component asset exceeding 10% components of an asset.
of the whole asset costs at the subsidiary level.

Major differences Major differences


Recognition: Recognition:
• So-called component accounting is appropriate when component assets have different useful lives and the common • Currently there are no
depreciation method over the asset's useful life would not reflect the pattern in which the asset's economic benefits are regulations available
consumed. concerning the component
• Allocation of the total expenditure on an asset to its component parts and accounting for each component is performed accounting.
separately.
• The expenditure incurred in replacing or renewing of the component (e.g. in course of major inspections or overhauls) is
accounted for as the acquisition of a separate asset and the “new” asset is written down on a systematic basis.
Measurement:
Measurement:
In addition to the benchmark treatment (measurement at cost) IAS 16 allows an alternative treatment (the revaluation model).
Health Products & Services Company A will apply the benchmark treatment in accordance with the US-GAAP.
Borrowing costs for
In March 2007 IAS 23 has been revised: the standard requires the capitalization of borrowing cost for qualifying assets (assets qualifying assets need to be
that take a substantial period of time to get ready for use or sale). This requirement is equal to US-GAAP. capitalized.

Disclosure: Disclosure:
Additional disclosures concerning PPE in general are necessary:
• Reconciliation of the carrying amount at the beginning and the end of the period. For this reconciliation no comparative
information is required.
• Amount of expenditures on account of property, plant and equipment in the course of construction during the period.
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IV-1. Impairment of Assets (Other than Goodwill and Intangible Assets with indefinite useful life)
3.1 Impairment of Assets (Other than Goodwill and Intangible Impairment of Long-lived Assets: SFAS 144
Assets with indefinite useful life): IAS 36

Key Points Key Points


• The procedure of testing assets for impairment is not the same • The procedure of testing assets for impairment is not the same
under IFRS and US-GAAP. As the related requirements are not under IFRS and US-GAAP. As the related requirements are
included in our US-GAAP Manual, the procedure is described in not included in our US-GAAP Manual, the procedure is
detail under both accounting systems and the differences are described in detail under both accounting systems and the
marked appropriately. differences are marked appropriately.
• One-step-approach • Two-step-approach
- An asset is impaired when its carrying amount exceeds its
recoverable amount. 1st step: Test of recoverability based on undiscounted cash flows
expected to result from the use and eventual disposition of the asset
- The recoverable amount represents the higher of (1) an asset's (asset group). If the carrying amount exceeds the undiscounted cash
fair value less costs to sell and (2) its value in use. The value in use flows, an impairment loss shall be recognized.
is probably the more common value as the fair value less costs to
sell is often not available. The value in use is the discounted value 2nd step: An impairment loss shall be measured as the amount by
of estimated future cash flows expected to arise from the which the carrying amount of a long lived asset exceeds its fair value
continuing use of an asset. (present value unless quoted market price is not available)
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Demo: Impairment of PP&E
Example: Determination and Measurement of Impairment Loss At 12/31/Y1, Toca Company has specialized equipment with the following
characteristics:
Carrying value $50,000
Selling price 40,000
Costs of disposal 1,000
Expected future cash flows 55,000
Present value of expected future cash flows 46,000

IFRS
In applying IAS36, asset’s recoverable amount would be determined as follows:
Net selling price
Value in use
Recoverable amount

The determination and measurement of impairment loss would be:


IFRS US
Carrying value
Recoverable amount
Expected future cash flows (Undiscounted)
Impairment loss

The following journal entry would be made to reflect the impairment of this asset under IFRS:
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E4 Impairment of an depreciable asset
Madison Company acquired a depreciable asset on 1/1/Y1 at a cost of $12 million.
At 12/31/Y1, Madison gathered the following information related to this asset:
Carrying amount (net of accumulated depreciation) $10 million
Fair value of the asset (net selling price)  $7.5 million
Sum of future cash flows from use of the asset $10 million
Present value of future cash flows from use of the asset $8 million
Remaining useful life of the asset  5 years

Required:
a. Use the information provided in this chapter related to the impairment of assets to determine the impact in Year 2 and Year 3 income from the
depreciation and possible impairment of this equipment (1) under IFRS and (2) under U. S. GAAP.
b. Determine the difference in income, total assets, and total stockholders’ equity for the period Year 1– Year 6 under the two different sets of
accounting rules. Note: If the asset is determined to be impaired, there would be no adjustment to Year 1 depreciation expense of $2 million.
a. Determine Impairment Loss in Year 1
IFRS U.S. GAAP
Carrying amount Carrying amount
Net selling price Future cash flows
Discounted future cash flows
Value in use
Impairment loss Impairment loss
Depreciation expense for Y2-6
b. F/S Impact

IFRS-Net Income Year 1 Year 2 Year 3 Year 4 Year 5 Year 6


a1. Depreciation expense
a2. Impairment loss
b1i. Impact on income
U.S. GAAP
a1. Depreciation expense
b1us. Impact on income
Sum of Y1-6
Diff. (IFRS-U.S. GAAP)
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IFRS-Total Assets Year 1 Year 2 Year 3 Year 4 Year 5 Year 6


Carrying value (at 1/1)
Depreciation expense
Impairment loss
Carrying value (at 12/31)

U.S. GAAP
Carrying value (at 1/1)
Depreciation expense
Carrying value (at 12/31)

Diff. (IFRS-U.S.GAAP)

IFR S-Stockholders’ Equity


Beginning balance
Depreciation expense
Impairment loss
Ending balance

U.S. GAAP
Beginning balance
Depreciation expense
Ending balance

Diff. (IFRS-U.S.GAAP)
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E5 Reconciliation from IFRS to US-GAAP: PP&E Revaluation


Iptat International Ltd. provided the following reconciliation from IFRS to U. S. GAAP in its most recent annual report (amounts in thousands of CHF):
Net Income Shareholders’ Equity
As stated under IFRS 541,713 7,638,794
U. S. GAAP adjustments
(a) Reversal of additional depreciation charges arising 85,720 643,099
from revaluation of fixed assets
(b) Reversal of revaluation surplus of fixed assets — ( 977,240)
As stated under U. S. GAAP 627,433 7,305,653

Required:
a. Explain why U. S. GAAP adjustment (a) results in an addition to net income. Explain why U. S. GAAP adjustment (a) results in an addition to
shareholders’ equity that is greater than the addition to net income. What is the share-holders’ equity account affected by adjustment (a)?
b. Explain why U. S. GAAP adjustment (b) results in a subtraction from share-holders’ equity but does not affect net income. What is the shareholders’
equity account affected by adjustment (b)?

a. + U. S. GAAP adjustment
Adjustment (a) relates to of the revaluation amount on fixed assets.
Adjustment (a) results in an addition to net income because the additional depreciation taken on the revaluation amount under U.S. GAAP.
The addition to net income pertains to the current year only.
The addition to net income in the current year plus the addition to net income in previous years is the cumulative effect on retained earnings, which is
the shareholders’ equity account affected by adjustment (a).
The addition to shareholders’ equity is greater than the addition to net income because of this cumulative effect.

b. - U. S. GAAP adjustment
Adjustment (b) relates to the revaluation surplus (increase in shareholders’ equity) that is recorded when fixed assets are revalued.
This increase under U.S. GAAP and shareholders’ equity must be reduced accordingly.
In this case, the shareholders’ equity account affected is Revaluation Surplus.
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E7 Impairment-PP&E and Subsequent Reversal


Buch Corporation purchased Machine Z at the beginning of Year 1 at a cost of $100,000. The machine is used in the production of Product X.
The machine is expected to have a useful life of 10 years and no residual value.
The straight-line method of depreciation is used.
Adverse economic conditions develop in Year 3 that resulted in a significant decline in demand for Product X.

At December 31, Year 3, the company develops the following estimates related to Machine Z:
Expected future cash flows  $75,000
Present value of expected future cash flows  55,000
Selling price  70,000
Costs of disposal  7,000

At the end of Year 5, Buch’s management determines that there has been a substantial improvement in economic conditions resulting in a strengthening
of demand for Product Z. The following estimates related to Machine Z are developed at December 31, Year 5:
Expected future cash flows  $70,000
Present value of expected future cash flows  53,000
Selling price  50,000
Costs of disposal  7,000

Required: Apply IAS 36 to determine


a. The carrying value for Machine Z to be reported on the balance sheet at the end of Years 1–5.
b. The amounts to be reported in the income statement related to Machine Z for Years 1–5.
24
a. Up to Year 3 economy
Depreciation Expense
Cost
Useful life
Residual value
Annual depreciation charge

Year 1 Year 2 Year 3


Carrying value (at 1/1)
Depreciation expense
Carrying value (at 12/31)

Test for impairment at December 31, Year 3:


Carrying value
Net selling price
Value in use
Recoverable amount (greater of the two)
Impairment loss

The impairment loss of ? would be recognized in income on December 31, Year 3 with an offsetting reduction in the asset’s carrying value.
As a result, the asset will be reported at on the 12/31/Y3 balance sheet at a carrying value of ? .
This amount will be depreciated over the remaining useful life of ? years on a straight-line basis or ? for remaining years.

Year 1 Year 2 Year 3 Year 4 Year 5


Carrying value (at 1/1)
Depreciation expense
Impairment loss
Carrying value (at 12/31)

b. Up to Year 5 economy
Review for reversal of impairment loss at December 31, Year 5:
Carrying value
Net selling price
Value in use
Recoverable amount (greater of the two)
Impairment loss
25
• IAS 36 requires an impairment loss to be reversed if the recoverable amount of an asset is determined to exceed its new carrying amount, but only if there are
changes in the estimates used to determine the original impairment loss or there is a change in the basis for determining the recoverable amount (from value in
use to net selling price or vice versa).
• Because recoverable amount has changed from net selling price at the end of Year 3 to value in use at the end of Year 5, and the recoverable amount is greater
than the carrying value at the end of Year 5, the impairment loss recognized in Year 3 should be reversed.
• However, the carrying value of the asset after reversal of the impairment loss should not exceed what it would have been if no impairment loss had been
recognized.
• The carrying value of Machine Z at December 31, Year 5 would have been $50,000 if no impairment loss had been recognized in Year 3 ($100,000 original
cost less $10,000 annual depreciation for five years).
• Thus, an increase in the carrying value of the asset of $5,000 should be recognized at December 31, Year 5 with a reversal of impairment loss in an equal
amount.
• The asset’s carrying value on the December 31, Year 5 balance sheet will be $50,000 ($45,000 + $5,000).
• This amount will be depreciated over the remaining useful life of 5 years on a straight-line basis.

• Summary of amounts to be reported on the balance sheet and income statement in Years 1 – 5:
Year 1 Year 2 Year 3 Year 4 Year 5
Carrying value (at 1/1)
Income Statement
Depreciation expense
Impairment loss
Reversal of impairment loss
Carrying value (at 12/31)

Income statement effect


26

IV-2. Impairment: Impairment of Goodwill and Intangible Assets with Indefinite Useful Life
IAS 36 SFAS 142

The requirements for the impairment test of goodwill and The requirements for the impairment test of goodwill and
intangible assets with indefinite useful life correspond generally intangible assets with indefinite useful life are different from the
with the IFRS-requirements for the impairment testing of assets or requirements for impairment of long-lived assets (see section 3.1 of
asset groups (see section 3.1 of this manual). this manual).
Whereas the impairment of goodwill and intangible assets with Whereas the impairment of goodwill and intangible assets with
indefinite useful life is included in the “general” standard (IAS 36) indefinite useful life is included in the “general” standard for
for impairment of assets under IFRS, these issues are covered by a impairment of assets under IFRS, these issues are covered by a
separate standard under US-GAAP. separate standard under US-GAAP.
Key Points Key Points
• The impairment test of goodwill and intangible assets with • The impairment test of goodwill and intangible assets with
indefinite useful life is required at least once a year, or if a indefinite useful life is required at least once a year, or if a
triggering event occurs. This impairment test is performed by triggering event occurs. This impairment test is performed by
the consolidation department. the consolidation department.
• Generally the procedure is the same under IFRS and US-GAAP • Generally the procedure is the same under IFRS and US-
for the impairment test of intangible assets with indefinite useful GAAP for the impairment test of intangible assets with
life (a comparison of the recoverable amount with its carrying indefinite useful life (a comparison of the fair value with its
amount – see section 3.1 of this manual). carrying amount; fair value is determined by using a
discounted cash flow approach).
• The carrying amount of the CGU does generally not include the
carrying amount of any recognized liability. (IAS 36.76(b)). At • The carrying amount of the reporting unit includes the
the most the carrying amount of the CGU may include carrying amount of all recognized liabilities.
operational liabilities (IAS 36.78)
• Two-step approach for the impairment test of goodwill
• One-step approach for the impairment test of goodwill
• The impairment loss is the excess of the carrying amount of the
• The impairment loss is the excess of the carrying amount of the reporting unit’s goodwill over the implied fair value
CGU over its recoverable amount
• The impairment loss cannot exceed goodwill
• If the impairment loss exceeds goodwill, the remaining loss is
allocated to the other assets of the CGU on a pro rata basis • Subsequent reversal of a previously recognized impairment loss
• The reversal of an impairment loss is required with the is prohibited.
exception an impairment loss for goodwill.
27

Major differences Major differences


Measurement: Measurement:
o Goodwill is allocated to those CGUs which are expected to benefit o The reporting unit is an operating segment or one level below an
from the synergies. (Please refer to section 3.1 for the definition of operating segment (SFAS 142.30).
CGU). These CGUs represent the lowest level at which goodwill is
monitored for internal management purposes. The CGU may not be
larger than a segment. For Health Products & Services Company A
the reporting units under US-GAAP (which are one level below
operating segments) can be maintained as CGUs for goodwill
impairment testing under IFRS.
o CGUs identified for goodwill impairment testing will probably
differ from CGUs identified for impairment testing of long-lived
assets.
o Goodwill is tested for impairment in one step: the recoverable o Goodwill is tested for impairment in two steps: (SFAS 142.19/20)
amount of the cash generating unit (CGU) to which goodwill has - First, the fair value of the reporting unit to which goodwill has
been allocated is compared with the carrying amount of this CGU been allocated is compared with the carrying amount of this
(IAS 36.90). unit. Should the carrying amount of the reporting unit exceed its
The recoverable amount represents the higher of the CGU’s fair fair value, the second step is necessary. Health Products &
value less costs to sell and its value in use. The value in use is Services Company A determines the fair value of the reporting
probably the more common value as the fair value less costs to sell unit by using the discounted cash flow approach.
is often not available. The value in use is the discounted value of - In the second step, the implied fair value of goodwill is
estimated future cash flows expected to arise from the continuing compared with the carrying amount of goodwill.
use of an asset.
o The carrying amount of the reporting unit includes the carrying
o The carrying amount of the CGU does generally not include the amount of all recognized liabilities.
carrying amount of any recognized liability. (IAS 36.76(b)). At the
most the carrying amount of the CGU may include operational
liabilities (IAS 36.78). The method applied by Health Products &
Services Company A for calculating the impairment test under US-
GAAP will remain the same under IFRS. With this method the
exclusion of non operational liabilities under IFRS leads to the same
result as the impairment test under US-GAAP.
o
28
o The impairment loss is the excess of the carrying amount of the o The impairment loss is the excess of the carrying amount of
CGU over the recoverable amount of the unit (IAS 36.90) goodwill over the implied fair value of goodwill.
o Allocation of the impairment loss: The loss is allocated first to o Allocation of the impairment loss: The loss is allocated to goodwill
goodwill and then to the other assets in the CGU on a pro-rata basis and cannot exceed the carrying amount of goodwill (SFAS 142.20).
(IAS 36.104).
o Subsequent reversal of a previously recognized impairment loss is
o The reversal of an impairment loss is required except for an prohibited.
impairment loss for goodwill

o All other assets included in a cash-generating unit have to be tested


for impairment before the cash generating unit including goodwill is
tested.

Disclosure:
o In addition to the disclosure requirements listed in section 3.1 of this
manual, it is necessary to complete a checklist “Estimates used to
measure recoverable amounts of CGU containing GW or intangible
assets with indefinite useful lives” (available on request)
29

V. Leases
Leases: IAS 17 Accounting for Leases: SFAS 13, SFAS 28

Key Points Key Points


• IAS 17 and US-GAAP are conceptually similar, but IAS 17 • The criteria for classifying leases seeing by lessee are similar to
provides less specific guidance and focuses rather on the ? those of IFRS – but specified criteria have to be met (see US-
of a lease than on the strict application of certain criteria. IAS GAAP Manual Appendix X).
17 requires a lease should be classified and accounted for as a 1. Title
finance lease when it transfers substantially all the risks and
rewards of ownership to the lessee. The standard then provides 2. Bargain Purchase Option
five situations that would normally lead to a lease being 3. 75% Useful life
capitalized:
4. PV of Minimum Lease Payment >=90% FMV
1. The lease transfers ownership of the asset to the lessee by the
end of the lease term. • The term finance lease under IFRS is equivalent to the term
2. The lessee has the option to purchase the asset at a price less capital lease under US-GAAP.
than fair market value.
3. The lease term is for the major part of the leased asset’s
economic life.
4. The present value of minimum lease payments at the
inception of the lease is equal to substantially all the fair value of
the leased asset.
5. The leased asset is of a specialized nature such that only the
lessee can use it.
Company Policy: Please contact the consolidation department or your
local auditor before going into lease agreements as there might be slight
differences in detail in the consideration under IFRS and US-GAAP
(e.g. the calculation of minimum lease payments).
For all lease agreements which are not leases – in case of the present
value of the minimum lease payments exceeding 1 million USD -
please check, whether the substance of the lease agreement is different
to the US-GAAP treatment.
30

If a sale-and-leaseback transaction results in an operating lease, In general immediate gain or loss recognition on the sale in a sale-
situations may arise in which profit or loss is ? and-leaseback transaction is not allowed – i.e. gain or loss is ?

o Application at Health Products & Services Company A: Sale-and- o Under sale-and-lease-back transactions resulting in operating lease,
lease-back transactions resulting in operating lease are among others any profit or loss from the initial sale should be deferred by the
under the lease agreements with region X and under machine lease seller-lessee and amortized in proportion to the rental payments
agreements in region Y. In the course of these transactions the over the period of time the assets are expected to be used.
dialysis machines are sold and simultaneously leased back. Then
these machines are available for the final customers (hospitals or
doctors) either under rental or package agreement.
Company Policy: If the necessary criteria are satisfied under IFRS (the
sale price is below the fair value), the deferred income recorded from
such sale-and-lease-back transactions under US-GAAP has to be
released within the first adoption of IFRS. In the subsequent periods for
IFRS purposes it is necessary to reverse the released deferred income
under US-GAAP.
31

E9 Reconciliation from IFRS to US-GAAP: PP&E, Development costs, Leaseback


Quantacc Company began operations on January 1, Year 1, and uses IFRS to prepare its financial statements.
Quantacc reported net income of $100,000 in Year 5 and had stockholders’ equity of $500,000 at December 31, Year 5.
The company wishes to determine what its Year 5 income and December 31, Year 5 stockholders’ equity would be if it had used U. S. GAAP. Relevant
information follows:
1. Quantacc carries fixed assets at revalued amounts. Fixed assets were last revalued upward by $35,000 on January 1, Year 3. At that time, fixed
assets had a remaining useful life of 10 years.
2. Quantacc capitalized development costs related to a new product in Year 4 in the amount of $80,000. Quantacc began selling the new product in
January, Year 5, and expects the product to be marketable for a total of five years.
3. Early in January, Year 5, Quantacc realized a gain on the sale and leaseback of an office building in the amount of $150,000. The lease is accounted
for as an operating lease and the term of the lease is 20 years.

Required: Calculate the following for Quantacc Company using U. S. GAAP (ignore income taxes):
a. Net income for Year 5.
b. Stockholders’ equity at 12/31/Y5
Stockholders’ equity under IFRS $500,000
Adjustments: Item No. Explanations
Reversal of revaluation of fixed assets
Reversal of accumulated depreciation on revaluation of fixed assets
Reversal of deferred development costs
Reversal of accumulated amortization on deferred development costs
Reversal of gain on sale and leaseback
Accumulated amortization of gain on sale and leaseback
Stockholders’ equity under U.S. GAAP

Net income under IFRS $100,000


Adjustments:
Reversal of depreciation on revaluation of fixed assets
Reversal of amortization of deferred development costs
Reversal of gain on sale and leaseback
Amortization of gain on sale and leaseback
Net income (loss) under U.S. GAAP
32

Sales and Leaseback:


Exhibit: 20-F Swisscom AG, 2006
Exerpt from Note 43. Differences between International Financial Reporting Standards and U. S. Generally Accepted
Accounting Principles The consolidated financial statements of Swisscom have been prepared in accordance with International
Financial Reporting Standards ( IFRS), which differ in certain significant respects from generally accepted accounting
principles in the United States ( U. S. GAAP). Application of U. S. GAAP would have affected the shareholders’ equity as of
December 31, 2006, 2005, and 2004, and net income for each of the years in the three- year period ended December 31, 2006,
to the extent described below. A description of the significant differences between IFRS and U. S. GAAP as they relate to
Swisscom are discussed in further detail below.

Reconciliation of net income from IFRS to U. S. GAAP The following schedule illustrates the significant adjustments to
reconcile net income in accordance with IFRS to the amounts determined in accordance with U. S. GAAP for each of the three
years ended December 31.

l) Sale and leaseback transaction In March 2001 Swisscom entered into two master agreements for the sale of real estate. At
the same time Swisscom entered into agreements to lease back part of the sold property space. The gain on the sale of the
properties after transaction costs of CHF 105 million and including the reversal of environmental provisions, was CHF 807
million under IFRS. A number of the leaseback agreements are accounted for as finance leases under IFRS and the gain on the
sale of these properties of CHF 129 million is deferred and released to income over the individual lease terms. The remaining
gain of CHF 678 million represents the gain on the sale of buildings which were sold outright and the gain on the sale of land
and buildings which qualify as operating leases under IFRS. Under IFRS, the gain on a leaseback accounted for as an operating
lease is recognized immediately. Under U. S. GAAP, in general the gain is deferred and amortized over the lease term. If the
leaseback was minor, the gain was immediately recognized. In addition, certain of the agreements did not qualify as sale and
leaseback accounting under U. S. GAAP because of continuing involvement in the form of purchase options. These
transactions are accounted for under the finance method and the sales proceeds are reported as a financing obligation and the
properties remain on the balance sheet and continue to be depreciated as in the past. The lease payments are split between
interest and amortization of the obligation.

Explanation: Sale- leaseback transaction if classified as an operating lease


U. S. GAAP again requires the seller to amortize any gain over the lease term.
IAS 17, in contrast, requires immediate recognition of the gain in income.
In its 2006 reconciliation to U. S. GAAP, Swisscom made an adjustment for this accounting difference that resulted in
an increase in income, as stated under U. S. GAAP, of 17 million Swiss francs. This reflects the amount of original gain
on sale and leaseback that was realized in 2001 that is amortized to income in 2006 under U. S. GAAP.
The gain was recognized in full in 2001 under IFRS. An adjustment also is made to stockholders’ equity to reverse the
difference between the full amount of gain recognized under IFRS (included in IFRS retained earnings) and the portion
of the gain that has been recognized through amortization under U. S. GAAP. This adjustment reduced IFRS equity by
280 million Swiss francs in 2006 to reconcile to a U. S. GAAP basis.
E10 Comparison of IFRS v. US-GAAP
Indicate whether each of the following describes an accounting treatment that is acceptable under IFRS, U. S. GAAP, both, or neither, by checking the
appropriate box.
Acceptable under IFRS US-GAAP Both Neither
1. A company takes out a loan to finance the construction of a building that will be used by the
company. The interest on the loan is capitalized as part of the cost of the building.
2. Inventory is reported on the balance sheet using the last-in, first-out (LIFO) cost flow assumption.
3. A company writes a fixed asset down to its recoverable amount and recognizes an impairment loss
in Year 1. In a subsequent year, the recoverable amount is determined to exceed the asset’s
carrying value, and the previously recognized impairment loss is reversed.
4. A company enters into an eight-year lease on equipment that is expected to have a useful life of
ten years. The lease is accounted for as an operating lease.
5. In preparing interim financial statements, interim periods are treated as discrete reporting periods
rather than as an integral part of the full year.
6. Research and development costs are capitalized when certain criteria are met.
7. The gain on a sale and leaseback transaction classified as an operating lease is deferred and
amortized over the lease term.
8. Past service costs related to retired employees that arise when a company makes an improvement
to its pension plan are amortized over the remaining expected lives of the retirees.
9. Dividends paid are classified as an operating cash outflow in the statement of cash flows.
10. Dividends paid are classified as a financing cash outflow in the statement of cash flows.         

1
This would be acceptable under IAS 17 if 80% of the life of the lease is not viewed as the “major part” of the lease.
2
Neither IFRS nor U.S. GAAP allows capitalization of research costs.
3
Past service cost arises when an employer improves the benefits to be paid employees in conjunction with a defined benefit plan.
IAS 19 provides the following rules related to past service cost:
• Past service cost related to retirees and vested active employees is expensed immediately.
• Past service cost related to non-vested employees is recognized on a straight-line basis over the remaining vesting period.
In comparison, U. S. GAAP requires that the past service cost related to retirees be amortized over their remaining expected life, and the past service
cost to active employees be amortized over their remaining service period.
4
IAS 7 allows dividends paid to be classified as either an operating or a financing cash flow, whereas U. S. GAAP classifies dividends paid as a
financing activity.

33
34

Comprehensive Example:
Bessrawl Corporation is a U. S.- based company that prepares its consolidated financial statements in accordance with U. S. GAAP. The company
reported income in 20X8 of $1,000,000 and stockholders’ equity at December 31, 20X8, of $8,000,000. The CFO of Bessrawl has learned that the U. S.
Securities and Exchange Commission is considering giving U. S. companies the option of using either U. S. GAAP or IFRS in preparing consolidated
financial statements. The company wishes to determine the impact that a switch to IFRS would have on its financial statements and has engaged you to
prepare a reconciliation of income and stockholders’ equity from U. S. GAAP to IFRS. You have identified the following six areas in which Bessrawl’s
accounting principles based on U. S. GAAP differ from IFRS. 1. Inventory 2. Property, plant and equipment 3. Intangible assets 4. Research and
development costs 5. Sale and leaseback transaction 6. Pension plan Bessrawl provides the following information with respect to each of these
accounting differences.
Inventory At year- end 20X8, inventory had a historical cost of $250,000, a replacement cost of $180,000, a net realizable value of
$190,000, and the normal profit margin was 20 percent.
Property, Plant, and The company acquired a building at the beginning of 20X7 at a cost of $2,750,000. The building has an estimated useful life
Equipment of 25 years, an estimated residual value of $250,000, and is being depreciated on a straight- line basis. At the beginning of
20X8, the building was appraised and determined to have a fair value of $3,250,000. There is no change in estimated useful
life or residual value. In a switch to IFRS, the company would use the revaluation model in IAS 16 to determine the carrying
value of property, plant, and equipment subsequent to acquisition.
Intangible Assets As part of a business combination in 20X5, the company acquired a brand with a fair value of $40,000. The brand is
classified as an intangible asset with an indefinite life. At year- end 20X8, the brand is determined to have a selling price of
$35,000 with zero cost to sell. Expected future cash flows from continued use of the brand are $42,000 and the present value
of the expected future cash flows is $34,000.
Research and The company incurred research and development costs of $200,000 in 20X8. Of this amount, 40 percent related to
Development Costs development activities subsequent to the point at which criteria had been met indicating that an intangible asset existed. As
of the end of the 20X8, development of the new product had not been completed.
Sale and Leaseback In January 20X6, the company realized a gain on the sale and leaseback of an office building in the amount of $150,000. The
lease is accounted for as an operating lease and the term of the lease is 5 years.
Pension Plan Pension Plan In 20X7, the company amended its pension plan creating a past service cost of $60,000. Half of the past service
cost was attributable to already vested employees who had an average remaining service life of 15 years, and half of the past
service cost was attributable to nonvested employees who on average had two more years until vesting. The company has no
retired employees.

Required
Prepare a reconciliation schedule to convert 20X8 income and December 31, 20X8, stockholders’ equity from a U. S. GAAP basis to IFRS. Ignore
income taxes. Pre-pare a note to explain each adjustment made in the reconciliation schedule.
35

Reconciliation from U.S. GAAP to IFRS


20X8
Income under U.S. GAAP $1,000,000
Adjustments:
Reversal of write-down of inventory to replacement cost
Additional depreciation on revaluation of equipment
Impairment loss on intangible asset (brand)
Recognition of deferred development costs
Reversal of amortization of deferred gain on sale and leaseback
Difference in amortization of prior service cost (11,000)
Income under IFRS

Stockholders’ equity under U.S. GAAP $8,000,000


Adjustments:
Reversal of write-down of inventory to replacement cost
Original revaluation surplus on equipment
Accumulated depreciation on revaluation of equipment
Impairment loss on intangible assets (brand)
Recognition of deferred development costs
Recognition of gain on sale and leaseback in 20X6
Accumulated amortization of deferred gain on sale and leaseback (20X6-20X8)
Difference in cumulative amortization of prior service cost (52,000)
Stockholders’ equity under IFRS
36
Explanation of Adjustments
Inventory
IFRS U.S. GAAP to Reconciliation to IFRS
Historical cost Historical cost
Estimated selling price Replacement cost
Costs to complete and sell
Net realizable value Net realizable value
Normal profit margin
NRV - profit margin
Market value NI Equity
Inventory loss (gain) Inventory loss (gain)
Equipment
Cost, 1/1/X7
Residual value
Depreciable value
Useful life
Annual depreciation
Book value, 12/31/X7

IFRS Revaluation US-GAAP


Fair value, 1/1/X8
Remaining useful life
Annual depreciation
Book value, 12/31/X8
  Reconciliation to IFRS
  IFRS U.S. GAAP NI Equity
Depreciation Expense- 12/31/X8
Revaluation Surplus-1/1/X8 *
Revaluation Surplus-12/31/X8

* Entry for 1/1/X8


  Dr. Cr.
Equipment 
Revaluation Surplus  
37

Intangible Assets.

IFRS U.S. GAAP Reconciliation to IFRS


Carrying amount Carrying amount NI Equity
Net selling price Future cash flows
Discounted future cash flows
Value in use
Impairment loss Impairment loss

Research and Development Costs.


    Reconciliation to IFRS
Calculation 20X8 $ IFRS US NI Equity
Research costs
Development costs

Sale and Leaseback.


Gain on the sale and leaseback (operating lease): $150,000 for a 5 year lease
Recognized in income 20X6 20X7 20X8 20X9 20X10
IFRS-IAS13
U.S. GAAP  
Reconciliation to IFRS-NI
Reconciliation to IFRS-Equity
38
(Skip) Pension Plan.

PSC-Unvested Amount: $30,000 Amortization years 20X7 20X8 Unvested + Vested


IFRS remaining years until vesting 2 15,000 15,000
U.S. GAAP remaining service life 15 2,000 2,000
Reconciliation to IFRS-NI -13,000 -13,000
Reconciliation to IFRS-Equity -13,000 -26,000
PSC-Vested-Expense: $30,000
IFRS Expensed immediately 1 30,000 0
U.S. GAAP remaining service life 15 2,000 2,000
Reconciliation to IFRS-NI -28,000 +2,000
Reconciliation to IFRS-Equity -28,000 -26,000

Reconciliation to IFRS-NI -11,000


Reconciliation to IFRS-Equity -52,000