Ruckman, Inc.: Converting from U.S. GAAP to IFRS
ACTG 4240 – Assignment #4
Fannie Fang, Yingqi Gu, Ya Wang
Ruckman Part I Solutions Page
1. For each of the 16 items listed below, briefly describe the difference in GAAP treatment and IFRS treatment. Just start with this form and type in your responses in the appropriate cells. You don’t need to give too much detail, just enough so your client can tell the difference. 2. In the “Needed to Convert?” column, very briefly describe the information you would need in order to convert the U.S. GAAP statements to comply with IFRS. If you were going to make a journal entry, what measurement or other information would you need? Please follow the bullet format I used below, if feasible. For an example – see “Inventory Flow assumption” below, which I completed for you.
| Needed to Convert to IFRS?
| Income Statement Items
| * Contingent amounts generally not being recorded as revenue until it’s resolved. * The residual method is precluded * The amount allocable to a delivered item is limited to the amount that is not contingent on the delivery of additional items. * Utilizing a multiple element account model or an incremental cost model to account for customer loyalty program. * When there is a loss on the first element but a profit on the second element, the company may defer the remaining costs until delivery of the second element. * The use of cost-to-cost revenue service revenue recognition is prohibited. * The completed-contract method is allowed which includes gross-profit approach.
| * Contingent revenue would be included * The reverse residual method may be acceptable to allocate arrangement consideration. * No limitation on the amount allocated to the first item. * Reward, loyalty or similar programs are accounted for as multiple-element arrangements. * The company may remove the loss on the first element. * Cost-to-cost method is allowed. * The completed-contract method is prohibited and the gross-profit approach is not allowed.
| * Recording the contingent revenue * The price is charged when sold is the item’s fair value. * A thorough consideration of all factors would be necessary so as to draw an appropriate conclusion. * Fair value of the award credits be deferred and recognized separately upon achieving all applicable criteria for revenue recognition. * Remove the loss on the first element or recognize all costs associated with the delivered element upon delivery of that element. * The percentage-of completion method is used and the stage of completion may be determined be a variety of methods. * Completion of contract no information * Completion using fair value. * Bundle unbundle; allocate value and cost.
| R&D expenditures
| Expense research and development costs when they arise.-patent expense R&B intense company do not have valuable assets in their B/S.- Investing R&D is not rational.-rule based-Why? consistency
| Research costs are expensed in the period that they arise, but development costs are required to be capitalized when certain criteria included in the standard are met. -Low threshold
| * Capitalize some development costs based on development capitalization criteria. * Detail of expense to meet criteria. * Asset R&D Exp.Get useful life to start amortize life:Amortized Exp. Asset-last year R&D expense: increase Retained earnings and assets. Last years also need some depreciation.Go back two years.Depend on how long the assets lived?
| Depreciation expense
| Component approach for depreciation and annual review of residual values are not required
| Separate significant components of different economic lives be recorded and depreciated. Reviewing residual values and useful lives at each balance sheet date is required.-break down into different parts: roof...
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