See the picture and answer , don’t hand wrinting thanks 2. Bianchi SPA, an Itali
ID: 2335022 • Letter: S
Question
See the picture and answer , don’t hand wrinting thanks 2. Bianchi SPA, an Italian manufacturing firm, uses IFRS. On 1/1/2012, Bianchi purchased equipment for S1,000,000. The equipment's useful life is 10 years. It has no residual value. On 1/1/2014, the company chose to revalue the equipment. The fair value of the equipment was $1,200,000. No revaluation was performed in 2015 The company's shareholders' equity as of the end of 2015 is $100 million. What would have been the reported shareholders' equity had the company used U.S. GAAP instead of IFRS? Ignore any tax effectsExplanation / Answer
Upward revaluation for Fixed assets is not allowed in US GAAP whereas it is allowed in IFRS.
Shareholders' equity as per IFRS is $100 million as of at the end of 2015.
This is after the revaluation effect. To compute the shareholders' equity as per US GAAP, this effect needs to be eliminated.
Increase in shareholders' equity on 1/1/14 due to revaluation = $1.2 Million - $1 Million = $0.2 Million
Depreciation charged upto the end of 2015 on this $0.2 Million = 0.2 / 8 * 2 = $0.05 Million
Net amount included in Shareholders' equity as of at the end of 2015 = 0.2 - 0.05 = $0.15 Million
Shareholders'' equity as of at the end of 2015 as per US GAAP = $100 Million - $0.15 Million = $99.85 Million