Bessrawl Corporation Essay

1). Inventory low(a) U. S. GAAP, Bessrawl flowerpot is allowed to report inventory on its balance sheet at lower of terms or market. Market in this case is defined as replacement constitute ($180,000) with net realizable revalue ($190,000) as ceiling and net realizable value minus a normal profit ($190,000 $38,000 = $152,000) as a floor. Cost of inventory is $250,000. Since market is lower than cost, inventory is written down to replacement cost of $180,000 and inform on the companys balance sheet at declination 31, 2011. This also guide to a loss of $70,000 reported on the companys income statement for December 31, 2011.However, below IFRS, Bessrawl Corporation 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, nether IFRS, Bessrawl Corporation income would be $10,000 big than reporting under U. S. GAAP, stockholder equity will also be $10,000 bigger under IFRS than under U. S.GAAP. 2). Building at a lower place U. S. GAAP, Bessrawl Corporation reported derogation expense of $100,000 distributively on 2010 and 2011 financial statements. Depreciation expense = ($2,750,000 $250,000)/25 yrs = $100,000/yr. Under IFRS limited review 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 littler income than under U. S. GAAP. Stockholders equity in 2011 will be $575,000 larger u nder 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 retained earnings. 3). Intangible Assets Under U. S. GAAP, an summation is impaired when its carrying keep down exceeds the future tense cash flows (undiscounted) expected to arise from its continued hold and disposal of the asset.The cross off acquired in 2011 has a carrying amount of $40,000 and future expected cash flows are $42,000, so it is not 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 price 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 Development Costs Under U. S. GAAP, research and victimization costs in the amount of $200,000 would be expense and recognized in ascertain 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 new 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 gain 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 would b e 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, but stockholders equity at December 31, 2011 under IFRS would be $60,000 larger than under U. S. GAAP.