IFRS financial statements

| November 13, 2015

the half of the work is done ,

only change the GAAP financial statements table to IFRS GAAP financial statements according to the requirement

 

please i need it by today , some one did not complete it !

Attachments:

Objectives:

CLO PLO Total marks Marks awarded
4 CS 2 6  
4 AS 3 21  
4 IT 2 9  
4 E 1 9  
  TOTAL 45  

 

Criteria Excellent Response

Level 3

Moderate Response

Level 2

Weak Response

Level 1

CS 3– Content (2 marks each level)Structure Written work has appropriate beginning with correct definition with clear explanation. Written work has appropriate beginning with correct definition but not with clear explanation Written work has definition with no clear explanation.
AS 3 – Applying procedure, formulas and principles or themes (7 marks each level)

 

Students apply correct and logical procedures, formulas, in the new context. Students apply partially correct and logical procedures, formulas, in the new context. Students apply partially correct procedure formulas, in the new context.
IT 2– (3 marks each level) Effective use of IT to gather, interpret and communicate information about US GAAP and IFRS.

 

The explanation of the written work provides in depth coverage of the topic and assertions are clearly supported by evidence. The explanation of the written work provides sufficient coverage of the topic and assertions are supported by evidence. The explanation of the written work does not cover the assigned topic, and assertions are not supported by evidence.
E 3– Identification of Ethical Issue and interpretation of answers incorporate ethical issues ( 3 marks each level) Answers is correct and interpretation of the answer incorporate ethical issues Answers is correct but the  interpretation of the answer partially  incorporate  ethical issues Answers is incorrect but the  interpretation of the answer does not  incorporate  ethical issues

 

Questions

 

INTRODUCTION

 

In 2008, the Securities and Exchange Commission (SEC) proposed a roadmap to issuing new rules that would require US domestic listed companies to adopt International Financial Reporting Standards (IFRS) by as early as 2014.

 

COMPANY BACKGROUND

 

Abeer Inc.

 

Abeer Inc. is a private company based in Charlotte, NC. The company operates retail sporting goods stores in most of the larger cities in the eastern US. It has issued common shares and bonds to a small group of investors and secured additional financing through bank loans. The company has no plans at this time to seek capital in public markets.

 

Abeer currently reports on a US GAAP basis. In February 2014, Abeer sent copies of its 2013 financial statements, for the calendar year 2013, to its investors and bank lenders. The company’s controller, Bayan, has been learning about IFRS, and she is giving more and more thought to Abeer possibly switching to these standards. As a private company, Abeer could elect to use IFRS as long as its stakeholders would be willing to accept IFRS basis financial statements. Bayan is aware that two versions of IFRS exist, the full version and a shorter and slightly simpler SME version. From preliminary conversations with the company’s investors and lenders, she has determined that they would be more willing to receive IFRS financial statements if prepared according to the full version of the standards.

 

Bayan has discussed the idea with other members of the company’s management team, and they have encouraged her to investigate further. As an initial step, Bayan wants to see how IFRS adoption would affect the company’s 2013 financial statements. In early March 2014, she meets with the members of her accounting staff and asks them to begin working on converting the recently released 2013 financial statements to an IFRS basis. Abeer’s 2013 US GAAP basis financial statements are shown in Exhibit 1.

 

Bayan and her staff plan to proceed with using the IFRS expected to be in effect as of December 31, 2014. She has gathered some information she believes will be relevant to converting Abeer’s 2013 financial statements and organized it into a list of 5 items, given in the table.

 

REQUIREMENT:-

  1. Assume you are a valued member of Bayan’s staff. She has asked you to assist with recasting Abeer’s 2013 financial statements to an IFRS basis. In part, she hopes this project will help you develop a better understanding of how IFRS differs from US GAAP. Specifically, you must research the differences between US GAAP and IFRS income statement and balance sheet Identify the major similarities and differences in table form.
S. No.                               IFRS US GAAP
1 The generation of revenue is under four categories only:

·         Goods sales

·         Rendering of services

·         Contracts

·         Assets

The US GAAP has revenue categorized under multiple categories and the topic of revenue is considered to be extensive.
2 The basic rule for all of these categories is that the benefits of any transaction would automatically make its way to entities and then the revenues could be generated. After this, there are separate rules for each category. Also, the concept of fair value does not exist under IFRS. The principles regarding revenue generation are quite simple i.e. the revenue is either earned or is realized. There are no specific categories so no rules are required separately. US GAAP has a fair value concept which is fundamental for calculating revenues generated.
3 The contingency rule is divided into the following criteria:

·         Risk transfer

·         Reliable measure of revenue generated.

·         Transfer of economic benefits along with transaction

The concept of contingencies is addressed with the rule of SAB.
4 There are separate categories of revenue generation so all the elements are categorized into these categories and then rules are applied to them. If there is a revenue with several elements present in it, then each element is handled separately by using various rules of accounting.

 

  1. Bayan also asks you to provide her with the following two things:
    1. Fill up the table that lists the 8 items, and for each one, shows how the item will be affected on the financial statements of IFRS format.
    2. A set of IFRS basis income statement and statement of financial position for the calendar year 2013.

 

 

NO DESCRIPTION TREATMENT EFFECT – B/S OR I/S
1 Abeer plans to use the fair value measurement model option for reporting its land under IFRS. The company has obtained independent real estate appraisals as follows:

January 1, 2013           $55,000

December 31, 2013     $70,000

 

According to the fair value measurement model, the fair value of assets have increased by $15,000. The capital has increased so profits generated have been increased as well.
2 The discontinued operation presented in Abeer’s 2013 US GAAP financial statements relates to a disposal in 2013 of the company’s stores in Florida. Abeer continues to operate retail stores in other parts of the eastern US. The Florida operations that were sold qualify as an asset group, but not as a separate major line of business or geographical area of operations.

 

The income from operations of the Florida stores of $16,920 (before taxes) from the beginning of the year to the sale date was determined as follows:

Net sales                                  $49,670

Cost of goods sold                    22,500

Salaries expense                         6,600

Utilities expense                         1,800

Advertising expense                   1,100

Depreciation expense                    750

Income from operations         $16,920

 

The cost of goods sold figure of $22,500 is computed on a LIFO basis. The figure would be the same under the average cost method which is required under IFRS.

 

The amount generated from sales is less than the amount spent on production. Therefore, the company had to face a loss of around $5580. This loss is due to the discontinued operations of company’s stores present in Florida. Company had to face loss due to discontinued operations of Florida.
3 Abeer has gathered the following information related to its cost of inventories and cost of goods sold:

2013        Prior Years

Inventories (LIFO)                $181,400 –

Inventories (Average Cost)   $265,900 –

C/G/S (LIFO)                       $405,800        $2,160,000

C/G/S (Average Cost)          $347,100        $2,134,200

 

According to the statistics, the cost of goods sold i.e. the production cost has decreased for the company as compared to previous years. The company has been able to reduce its production costs as compared to previous years.
4 The bank overdraft of $8,500 exists on a checking account at Citigroup. This particular account sometimes is overdrawn, and when that happens, the overdraft automatically converts to a loan balance. Abeer does not have any other cash accounts at Citigroup

 

This means that, if Abeer’s account is empty, she could be granted an amount of $8,500 as loan. The overdraft is basically considered as a loan and it requires payment of interest as well. In case accounts is empty, the check would not bounce if its value is less than $8,500.
5 During 2013, Abeer’s operations in Virginia were hit by the biggest earthquake to occur in that area in more than a century. The company suffered losses to facilities and inventory totaling $22,900 (before taxes).

 

The losses due to earth quake could be recovered if the products were insured. This insurance policy would act as a mitigation to all the risks being faced by the company. Presence of an insurance policy could save company from losses.
6 At year-end 2012, Abeer had notes receivable totaling $61,300. Abeer recognized impairment of these receivables in 2012 amounting to $15,700. The company has determined that the same write-down would have been needed in IFRS financial statement for 2012. At year-end 2013, Abeer continues to hold these notes and the debtor’s credit rating has improved dramatically. As a result, the present value of the expected future cash flows from the notes has increased to their full face value of $77,000. The strategy of Abeer has worked and the cash flow has increased to its maximum value. The increase in cash flow is only due to notes receivable held by Abeer.
7 Abeer has gathered the following information related to the market value of its inventories at December 31, 2013

 

Replacement cost        $167,600

Net realizable value    $249,100

Net realizable value reduced by normal price $174,300

This means that the costs of assets of the company have decreased and that their value has deceased their purchase value. The net costs of assets of company have decreased.
8 Assume the company’s income tax rate for all years and income items is 35%. For any adjustment that create a change in Abeer’s income taxes, recognize the effect of the change in income taxes through the company’s Deferred Income taxes account. Due to any change in income taxes, the revenue generated by the company and the fair value of assets would be affected. The revenue and fair value would be affected.

 

 

Exhibit 1- US GAAP financial statements

 

AbeerInc

Statement of Earnings

For the year ended December 31, 2013

$$

Net Income   731,600
Cost of goods sold   405,800
Gross Margin   325,800
Operating expenses:    
Salaries expenses 98,300  
Utilities expenses 27,400  
Advertising expenses 23,700  
Repairs expenses 21,200  
Depreciation expenses 16,900  
Bad Debt expenses 9,800  
Amortization expenses 4,300 201,600
Income from operations   124,200
Other revenue and gains:    
Dividend Revenue 7,400  
Gain on sale of investment 27,100 34,500
Other expenses and losses:    
Interest expenses (9,600)  
Loss on inventory write-down (7,100)  
Loss on retirement of debt (11,800) (28,500)
Income from continuing operations before taxes   130,200
Income taxes   45,570
Income from continuing operations   84,630
Discontinued operations:    
Income from operations ( net of taxes of $5,922) 10,998  
Loss on disposal ( net of taxes of $15,750) (29,250) (18,252)
Extraordinary loss from earthquake damage ( net of taxes of $8,015)   (14,885)
Net Income   $51,493

 

 

 

AbeerInc

Statement of Comprehensive Income

For the year ended December 31, 2013

 

Net Income   51,493
Other comprehensive income    
  Unrealized gain on available for sale securities ( net of taxes $5,110)   9,490
Comprehensive income   $60,983

 

 

AbeerInc

Statement of Financial Position

As at December 31, 2013

 

Assets      
Current Asset:      
Cash and equivalents   55,240  
Account Receivable 164,700    
Less: Allowance for bad debts (9,900) 154,800  
Inventories 181,400    
Less: Allowance to reduce to market (7,100) 174,300  
Deferred income   21,600  
Prepaid Expenses   10,900  
    Total current Asset     416,840
Long term Investment     132,700
Property, plant & Equipment:      
    Land   32,000  
    Building 319,400    
    Less: Accumulated Depreciation (126,300) 193,100  
    Equipment 171,900    
    Less: Accumulated Depreciation (108,200) 63,700 288,800
Intangible Asset:      
    Goodwill   52,000  
    Licenses   34,600 86,600
Other Assets:      
    Long Term notes receivable     61,300
Total Assets     $986,240
Liabilities & Stockholder’s Equity      
Current liabilities      
Account Payable   87,100  
Accrues expenses   35,400  
Customer deposit   26,900  
Bank overdraft   8,500  
Total current Liabilities     157,900
Noncurrent Liabilities      
Bond payable   120,000  
Long term notes payable   113,200  
Long term lease obligations   91,600  
Deferred income taxes   54,700 379,500
Total Liabilities     537,400
Stockholder’s equity      
Common Stock 75,000    
Additional Paid In capital 138,400 213,400  
Retained Earnings   205,140  
Accumulated other comprehensive income   30,300  
Total shareholder’s equity     448,840
Total liabilities & Shareholder’s equity     $986,240

 

 

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Assignment Objectives
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