Class Work 20

Asset Revaluation in IFRS. ABC company had the land purchased for $100,000 on 1/1/X1, and the fair market value was $120,000 on 12/31/X1, $70,000 on 12/31/X3, $110,000 on 12/31/X5, disposal for $160,000 on 5/31/X6. Under IFRS, the company decided to follow the fair value method to revalue the land every year end. Journalized each transactions. In GAAP, Journal Entry In GAAP. Balance Sheet (x1 ~ x6) In IFRS, Journal Entry In IFRS. Financial Position (x1 ~ x 6) 1/1/x1. Purchase for 100,000 Cash RE 1/1/x1. Purchase for 100,000 Land RE Land AOCI Cash AOCI :Accumulate Other Comprehensive Income 12/31/x1. Year end at 120,000 GAAP. Comprehensive Income x1 12/31/x1. Year end at 120,000, IFRS. Comprehensive Income x1 Gain Gain 1,291 Loss #N/A Loss Net Income (Loss) Unrealized revaluation gain over the original cost on the OCI Net Profit (Loss) OCI OCI 12/31/x3. Year end at 70,000 GAAP.Comprehensive Income x3 12/31/x3. Year end at 70,000 IFRS. Comprehensive Income x3 Gain #N/A Gain Loss Loss Net Income (Loss) #N/A Net Profit (Loss) OCI Unrealized revaluation gain on OCI extinguished OCI Unrealized Loss (Original Cost - FV) recognized on the I/S immediately 12/31/x5. Year end at 110,000 GAAP. Comprehensive Income x5 12/31/x5. Year end at 110,000 IFRS. Comprehensive Income x5 Gain #N/A Gain Loss #N/A Loss Net Income (Loss) #N/A Net Profit (Loss) OCI Unrealized revaluation gain over the original cost on the OCI OCI IFRS doesn't allow the unrealized gain to affect current I/S directly. 5/31/x6. disposal for $160,000 GAAP. Comprehensive Income x6 5/31/x6. disposal for $160,000 IFRS. Comprehensive Income x6 Gain Gain Loss #N/A Loss Net Income (Loss) #N/A Net Profit (Loss) OCI #N/A OCI Gain (Loss) = FV - BV IFRS doesn't allow the gain over the original cost to affect current I/S. Unrealized revaluation gain over the Original cost on OCI extinguished by RE recognized

PP&E in IFRS. Case 1. Interest Capitalization in IFRS The Company has a fiscal year ending December 31. On January 1, 20X1, the Company borrowed $5,000,000 at 10% to finance construction of its own building. During the 20X1, expenditures for the partially completed building totaled $8,000,000. These expenditures were incurred evenly throughout the period. Interest earned on the unexpended portion of the loan amounted to $200,000 for the year. How much should be capitalized at December 31, 20X1 under US GAAP and IFRS? Under GAAP. =8000000*1/2*10% #N/A Under IFRS. =8000000*1/2*10%-200000 #N/A 12/31/x1. CIP Interest Capitalization 12/31/x1. CIP Interest Capitalization 00*1/2*10% CIP 400,000 Cash 500,000 CIP 200,000 Cash 500,000 =E12-C12 Interest Expense 100,000 Interest Income 200,000 =C13 Interest Expense 100,000 =E13 Cash 200,000 =C14 Cash 200,000 Case 2. Impairment Loss in IFRS Information related to equipment owned by K Company follows. Original cost: $900,000, Accumulated depreciation to date: $100,000 Expected future cash flows(undiscounted): $825,000, Fair value: $790,000, Value in use: $785,000, Selling costs: $30,000 Assuming K will continue to use the equipment, test the asset for impairment under both IFRS and US GAAP. Under GAAP. Under IFRS. 1. Impairment Test. BV > Undiscounted Cash flows 1. Impairment Test and Loss. BV > Recoverable amount BV of Equipment 800,000 #N/A BV of Equipment 800,000 =E25 Undiscounted Cash flows 825,000 =825000 Value in use = Present value of expected cash flow 785,000 #N/A Impaired? (Y/N) N Net Selling Price = Fair value - selling costs 760,000 =790000-30000 BV < Undisc. CF Recoverable amount = Max [Value in use, Net Selling Price] 785,000 =J26 Impaired? (Y/N) Y BV > Recoverable amount 2. Impairment Loss, when BV > FV 2. Impairment Loss, when BV > Recoverable Amount No entry No entry Impairment Loss 15,000 Accumulated Dep 15,000 No Impairment. despite of BV 800,000 > FV 790,000, because not passed the test =J25-J28

GW impairment for IFRS. LT asset details of Cash Generating Unit (CGU = Reporting Unit in GAAP) LT Assets: Building: $200,000, Fixture: 300,000, Equipment: 500,000, Goodwill: 100,000 Present value of expected cash flow generated by CGU: 700,000, Net selling price: 650,000 What amount is the Goodwill impairment loss? Impairment Loss on LT assets: BV of LT assets CGU > Recoverable amount of LT Asset CGU BV of LT assets CGU 1,100,000 =200000+300000+500000+100000 Value in use of CGU = Present value of expected cash flow 700,000 =700000 Net selling price of CGU 650,000 #N/A Recoverable amount of CGU = Max [Value in use, Net selling price] 700,000 =E11 Impairment Test & Loss on LT assets 400,000 =E10-E13 J/E. Impairment Loss on LT assets Impairment Loss 400,000 GW 100,000 =100000 Building 60,000 =($C$17-$E$17)*200000/1000000 bcs building+fixture+equipt in the start Fixture 90,000 =($C$17-$E$17)*300000/1000000 Equiptment 150,000 =($C$17-$E$17)*500000/1000000 *If all GW Impaired, then remaining 300,000 proportionally impaired to other assets additionally. In IFRS. Financial Position x1 Building 140,000 RE (400,000) Fixture 210,000 Equipment 350,000 Goodwill - B/P 1,100,000 Total Assets 700,000 Total L + E 700,000 IFRS. Statement of Profit or Loss x1 Loss (400,000)