Reconciliation from IFRS to GAAP
You are the CFO for Mills company (reporting using IFRS) andmust reconcile your financial statements for the years ending 2008,2009, and 2010 to U.S. GAAP (The Income Statement and StatementStockholders’ Equity). Youhave identified the following 5 areaswhere there are differences between IFRS and U.S. GAAP at variousdates. Be sure to consider the cumulative effects ofprior year transactions for each year.
Intangible Assets
As part of a business combination in January 2004, the companyacquired a brand for $15,000,000. The brand isclassified as an intangible asset with a 15 year usefullife. At year-end 2008, the brand is determined to havea selling price of $8,000,000 with zero cost tosell. Expected future cash flows from continued use ofthe brand are $13,000,000 (undiscounted) and the present value offuture cash flows is 9,000,000
Research and Development Costs
The company incurred research and development costs of$2,000,000 in 2008. Of this amount, 70% related todevelopment activities subsequent to the point at which criteriahad been met that an intangible asset existed. Thedevelopment costs were completed at the end of 2008 and will beamortized over 10 years beginning 2009.
Property Plant and Equipment
On January 1, 2009 a building that had an original cost of$20,000,000 and (Purchase date January 1 2001) and was beingdepreciated over 20 years was determined to have a fair value of$15,000,000. The company uses the revaluationmodel for such assets.
Sale Leaseback
On January 1, 2006 the company realized a gain on a salesleaseback of $6,000,000. The term of the lease (startingthe date of the sale) is 15 years.
