Log in
Accounting
1
answer
0
watching
102
views

At the beginning of 2016, IASB issues a new accounting standardfor lease transactions ( IFRS 16), which will be rffective from 01January 2019.

1. Explain the accounting treatment for lease transactions onthe lessee's financial statements under both the current accountingstandard (IAS 17) and new standare (IFRS 16) on the lessee'sfinancial statement.

Watch
1
answer
0
watching
102
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Jarrod Robel
Jarrod RobelLv2
28 Sep 2019

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share

Related questions

answer the following questions:

1.) Why did the FASB and IASB set out on the joint project to issue a new lease standard?

2.) What are some of the criticisms of the old lease standard for both GAAP and IFRS? (Was the main complaint regarding lessor or lessee accounting?)

3.) What is the main difference of the previous GAAP Topic 840/IAS 17 and the new lease guidance Topic 842/IFRS 16? (Note: this new requirement is the same under GAAP and IFRS.)

4.) When will the amendments be effective for a public company using GAAP? Can a public company choose to adopt the new standard early?

5.) While many of the requirements are the same for Topic 842 and IFRS 16, some differences still remain and the standard is not converged. What is the main difference between Topic 842 and IFRS 16?

Good grammar, spelling and punctuation will be considered in grading. You should use paragraph form.

You are an assistant to the CFO of Organic Markets. Organic Markets is a fast growing national supermarket chain, and is evaluating growth opportunities overseas. The CFO is looking at a natural food grocery chain in France as a potential acquisition target. Both Organic Markets and the French grocery chain lease most of their store space under operating leases. A major shareholder of your company asked your boss whether accounting for operating leases under IFRS is similar to U.S. GAAP. Furthermore, the shareholder asked whether the recently issued new lease accounting standards will have a significant impact on the financial statements of the French company and Organic Markets. Your boss told the major shareholder that he would get back to him in a day or two, as he has not paid much attention to the lease accounting development.

Your boss asked you to do some research and prepare a memo for him. The memo should discuss briefly:

1. how the IASB’s new standard will impact the French grocery chain’s financial statements

Please discuss in depth.

Case 4-1 Bessrawl Corporation

Bessrawl Corporation is a U. S.- based company that prepares itsconsolidated financial statements in accordance with U. S. GAAP.The company reported income in 2011 of $1,000,000 and stockholders’equity at December 31, 2014, of $8,000,000. The CFO of Bessrawl haslearned that the U. S. Securities and Exchange Commission isconsidering giving U. S. companies the option of using either U. S.GAAP or IFRS in preparing consolidated financial statements. Thecompany wishes to determine the impact that a switch to IFRS wouldhave on its financial statements and has engaged you to prepare areconciliation of income and stockholders’ equity from U. S. GAAPto IFRS. You have identified the following six areas in whichBessrawl’s accounting principles based on U. S. GAAP differ fromIFRS. 1. Inventory 2. Property, plant and equipment 3. Intangibleassets 4. Research and development costs 5. Sale and leasebacktransaction Bessrawl provides the following information withrespect to each of these accounting differences.

Inventory: at year-end 2014, inventory had a historical cost$250,000, a replacement cost of $180,000, a net realizable value of$190,000, and a normal profit margin of 20%.

Property, plant and equipment: the company acquired a buildingat the beginning of 2013 at a cost of $2,750,000. The building hasan estimated useful life of 25 years, an estimated residual valueof $250,000 and is being depreciated on straight-line basis. At thebeginning of 2014, the building was appraised and determined tohave a fair value of $3,250,000. There is no change in estimateduseful life or residual value. In a switch to IFRS, the companywould use the revaluation model in IAS 16 to determine the carryingvalue of property, plant, and equipment subsequent toacquisition.

Intangible assets: As part of a business combination in 2011,the company acquired a brand with a fair value of $40,000. Thebrand is classified as an intangible asset with an indefinite life.At year-end 2014, the brand is determined to have a selling priceof $35,000 with zero cost sell. Expected future cash flows fromcontinued use of the brand are $42,000 and the present value of theexpected future cash flows is $34,000.

Research and development costs: the company incurred researchand development costs of $200,000 in 2014. Of this amount, 40%related to development activities subsequent to the point at whichcriteria had been met indicating that an intangible asset existed.As of the end of 2014, development of the new product had not beencompleted.

Sale and leaseback transaction: in January 2012, the companyrealized a gain on the sale-and-leaseback of an office building inthe amount of $150,000. The lease is accounted for as an operatinglease, and the term of the lease is five years.

Required: prepare reconciliation schedule to convert2014 income and December 31, 2014 stockholders’ equity from a U.S.GAAP basis to IFRS. Ignore taxes. Prepare a note to explain eachadjustment made in the reconciliation schedule.

Weekly leaderboard

Home
Homework Help 3,900,000
Accounting 580,000
Start filling in the gaps now
Log in