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1. Name three costs included in the capitalization ofland?

2. Name three costs that should not be treated asresearch and development.

3. What type of intangible assets is subject toamortization

4. What are three different methods ofamortization?

5. Under GAAP, internally generated intangible assetsmay not be capitalized. What are the principles for accounting forinternally generated intangible assets under IFRS?

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Collen Von
Collen VonLv2
28 Sep 2019

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In the interactive lecture materials for this module, you readarticles and materials and watched various videos, which describedthe history of the convergence process between the US GAAP andIFRS, including the status of convergence today. You also reviewedreadings showing the differences that still exist today between USGAAP and IFRS on various accounting subjects. Below is a list ofsome particularly significant accounting topics or subjects wheredifferences still exist today between the US GAAP and IFRS:inventories goodwill and other intangible assets contingenciesaccounting for income taxes including uncertainty in income taxesimpairment of long-lived assets to be held or used or to bedisposed of by sale research and development ‘development’expenses. Select one of the above accounting subjects, preferably asubject personally or professionally interesting to you, and answerthe following questions related to that topic in your initialresponse. Copy and paste each question below in bold type in yourinitial response to ensure that you answer each question. Thesubject line of your initial posting should be the accountingsubject you have decided to address (for example: Inventories):Briefly explain the reason this subject was of interest to you.Describe, in an appropriate level of detail, the major differencesthat exist today between US GAAP and IFRS for that subject.Research if any progress has been made to date on converging theaccounting and/or the financial reporting for that subject betweenthe FASB and the IASB. If so, describe the progress, and if not,describe why progress has not yet been made, either from yourresearch or in your opinion or both. Provide the class with aspecific and detailed computational-based example of how thedifferences in the accounting and financial statement treatment ofthis subject could potentially affect the comparability of both thebalance sheet and the income statement prepared under US GAAP andIFRS. State your opinion on whether you believe the FASB and theIASB eventually will reach convergence on this subject, and why orwhy not. Include an explanation of your opinion and what might besome other considerations preventing or delaying convergence onthis subject.

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.

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.

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