CASE A 1: ENRON

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CASE 4-1: Bessrawl Corporation
Reconciliation of net income from U.S. GAAP to IFRS 2011
Net Income according to U.S. GAAP attributable to equity holders of
Bessrawl Corporation ………… $1,000,000.00
IFRS adjustments:
Add: Reversal of inventory cost written down to replacement cost….. 10,000.00
Less: Additional depreciation of building after 2011 revaluation…….. (25,000.00) Impairment loss on intangible assets…………… (5,000.00)
Add: Deferred research and development costs…….. 80,000.00
Less; Reversal of amortization deferred gain on sale-and-leaseback…… (30,000.00)
Net Income according to IFRS …………………………. $1,030,000.00

2011
Stockholders’ Equity according to U.S. GAAP…………………… $8,000,000.00
IFRS adjustments:
Add: Reversal of inventory cost written down to replacement cost…….. 10,000.00 Revaluation surplus on building……………….. 600,000.00
Less: Accumulated depreciation on revaluation of building…………… (25,000.00) Impairment loss on intangible assets………………………………… (5,000.00)
Add: Deferred research and development costs…………………………… 80,000.00 Gain on sale-and leaseback in 2009…………………………. 150,000.00
Less: Accumulated amortization of deferred gain on sale-and-leaseback (2009-2011).. (90,000.00)
Stockholders’ Equity according to IFRS $8,720,000.00

Explanation of adjustments made to income and stockholder’s equity

1). Inventory: - Under U.S. GAAP, Bessrawl Corporation is allowed to report inventory on its balance sheet at lower of cost or market. Market in this case is defined as replacement cost ($180,000) with net

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