Solution
Pooja answered on
Jul 25 2021
IFRS vs. US GAAP Analysis
of
Jaunty Coffee Company
Student Name
University
US GAAP vs. IFRS Analysis Ru
ic
A 1. Completion of the “IFRS Balance Sheet”
Unsatisfactory
Adequate
Proficient
Excellent
A 2. Completion of the “Differences between GAAP and IFRS” section.
Unsatisfactory
Adequate
Proficient
Excellent
B 1. “Additional Information” Impact on balance sheet.
Unsatisfactory
Adequate
Proficient
Excellent
B2. “Similarities and Differences in eight items of Additional Information section”
Unsatisfactory
Adequate
Proficient
Excellent
B3. Justification for Use of IFRS or GAAP in accordance with calculations in Part A
Unsatisfactory
Adequate
Proficient
Excellent
C1. & C2. Recommendation and Justification for recommendation
Unsatisfactory
Adequate
Proficient
Excellent
D. Submission of Balance sheet and Income Statement
Unsatisfactory
Adequate
Proficient
Excellent
E. Sources
Unsatisfactory
Adequate
Proficient
Excellent
A 1. Completion of “IFRS Balance Sheet” section using the numbers provided in the “GAAP Balance Sheet” section.
Jaunty Coffee Company
IFRS BALANCE SHEET
As on 31st December,2012
Assets
(Amount in $)
Cu
ent assets:
Cash
86,100
Short-term investments (available for sale)
15,000
Accounts receivable
37,000
Notes receivable
25,000
Inventory
120,000
Other cu
ent assets
34,500
Total cu
ent assets
317,600
Long-term assets
Long-term investments
100,000
Property, plant, and equipment
116,000
Less accumulated depreciation
(34,800)
81,200
Intangible assets
Goodwill
12,000
Copyright
10,000
Trademark
20,000
Accumulated amortization
(8,700)
33,300
Total long-term assets
214,500
Total assets
532,100
Liabilities and stockholders' equity
Cu
ent liabilities
-
Accounts payable
30,000
Accrued expenses
20,000
Short/Cu
ent long-term debt
8,000
Taxes payable
15,500
Other cu
ent liabilities
12,000
Total cu
ent liabilities
85,500
Long-term liabilities
-
Notes payable
17,000
Bonds payable
34,500
Defe
ed long-term liability charges
12,000
Defe
ed Tax Liability
13,825
Other long-term liabilities
13,000
Total long-term liabilities
90,325
Total liabilities
175,825
Stockholders' equity
-
Common stock
200,000
Retained earnings
156,275
Total stockholders' liability
356,275
Total liabilities and stockholders' equity
532,100
A.2 Completion of the “Differences between GAAP and IFRS” section.
DIFFERENCES BETWEEN GAAP AND IFRS
As on 31st December,2012
Assets
Jaunty Coffee Company
(Amount in $)
Cu
ent assets:
Cash
-
Short-term investments (available for sale)
-
Accounts receivable
-
Notes receivable
-
Inventory
(45,000)
Other cu
ent assets
-
Total cu
ent assets
(45,000)
Long-term assets
-
Long-term investments
-
Property, plant, and equipment
Less accumulated depreciation
-
Intangible assets
-
Goodwill
-
-
Copyright
(3,000)
-
Trademark
(3,000)
-
Accumulated amortization
1,500
(4,500)
Total long-term assets
(4,500)
Total assets
49,500
Liabilities and stockholders' equity
Cu
ent liabilities
-
Accounts payable
-
Accrued expenses
-
Short/Cu
ent long-term debt
-
Taxes payable
(3,500)
Other cu
ent liabilities
-
Total cu
ent liabilities
(3,500)
Long-term liabilities
-
Notes payable
-
Bonds payable
-
Defe
ed long-term liability charges
-
Defe
ed Tax Liability
13,825
Other long-term liabilities
-
Total long-term liabilities
13,825
Total liabilities
17,325
Stockholders' equity
-
Common stock
-
Retained earnings
32,175
Total stockholders' liability
32,175
Total liabilities and stockholders' equity
49,500
B.1 Impact of additional information on Balance Sheet
1. Short-term Investments (Available for Sale): In 2012 there were $4,000 in short-term investments, which was attributed to a gain in the exchange rate; this amount was included in the beginning value of $15,001.
In case of the short-term investment (available for sale), both IFRS and US GAAP will have same impact on balance sheet. The short-term investments (available for sale) are recorded at fair market value at close of the accounting period both in case of US GAAP and IFRS. In the given case, the adjustment to the fair-market value of the short-term investment (available for sale) has been recorded on the balance sheet. Although, IFRS recognizes the increase/(decrease) in fair value of securities available for sale due to fluctuation in cu
ency value in the income statement whereas GAAP recognizes as other comprehensive income , but it will have no impact on balance sheet.
The necessary entry required to take this effect into account is:
Shareholder’s Equity $2600
Tax Payable $1400
To Foreign Exchange Cu
ency Gain $4000
This adjustment will eliminate the $4000 gain in exchange rate that was posted to the balance sheet under GAAP. Other Comprehensive Income being recorded net of taxes, $ 2600 is taken from OCI and $1400 from Taxes Payable. Under IFRS, $4000 cu
ency gain is posted to Foreign Exchange Gain/Loss (under Other Incomes in Income Statement).
2. Jaunty Coffee Company uses the LIFO method for inventory valuation. At the end of 2011 the inventory reserves were $35,000, and at the end of 2012 the reserves were $45,000
Jaunty Coffee Company uses the Last in First out (LIFO) method for inventory valuation. IFRS prohibits enterprises using LIFO method for inventory valuation whereas U.S. GAAP allows the same. Jaunty Coffee Company would require to change the inventory valuation from LIFO to either First in First out (FIFO) or Weighted Average Cost (WAC). The following changes will be necessary to adopt FIFO method for valuation of inventory:
a) Inventory will be increased by $45000 , the closing LIFO reserves
Inventory in FIFO method = Inventory LIFO Method + LIFO Reserve
= $75000 +...