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International Accounting Case

Use the information from difference between IFRS and US GAAP to answer the following question.

Parvin Corporation is a Japanese-Based company that prepares its consolidated financial statements in accordance with IFRS.  The company reported income in 2017 of $1,260,000 and stockholders’ equity at December 31, 2017, of $7,660,000.

            The CFO of Parvin has learned that the U.S. Securities and Exchange Commission is accepting financial statements of non-US firms using either US GAAP or IFRS in preparing consolidated financial statements.  The CFO is curious  to determine the impact that switch from IFRS to U.S. GAAP would have on its financial statements and has engaged you to prepare a reconciliation of income and stockholders’ equity from IFRS to U.S. GAAP.  You have identified the following five areas in which Parvin’s accounting principles based on IFRS differ from U.S. GAAP.

  1. Inventory
  2. Property, plant, and equipment
  3. Intangible assets
  4. Research and development costs
  5. Sale-and-leaseback transaction

Parvin provides the following information with respect to each of these accounting differences.


At year-end 2017, inventory had a historical cost of $620,000, Information, such as replacement cost, selling value, sales commission, and profit margin for each individual product is provided below (Parvin company is conservative and calculating based on item-by-item of inventory):

Product Cost Replacement Cost ( Fair Value) Selling Value Sales commission Normal Profit Margin
Television $160,000 $130,000 $170,000 10% 20%
Camera  160,000  165,000 $180,000 10% 15%
Laptop  110,000   91,000 $120,000 10% 8%
Computer $190,000 181,000 200,000 10% 18%
Total   $620,000        

Property, Plant, and Equipment

The company acquired a building at the beginning of 2014 at a cost of $2,750,000.  The building has an estimated useful life of 25 years, an estimated residual value of $250,000, and is being depreciated on straight-line basis.  At the end of 2017 (before calculating depreciation), the building was appraised and the following information was available for this building:

Replacement (fair market value)                                             $2,370,000

Undiscounted future cash-flow from use of this building     $2,400,000

Discounted future cash-flow from use of this building          $2,200,000

Net realizable value of the building if it is sold                      $2,100,000

Intangible Assets

As part of a business combination in 2012, the company acquired a brand with a fair value of $41,000.  The brand is classified as an intangible asset with an indefinite life.  At year-end 2017, the brand is determined to have a selling price of $37,000 with zero cost to sell.  Expected future cash flows from continued use of the brand are $42,000 and the present value of the expected future cash flows is $34,000.

Research and Development Costs

The company incurred research and development costs of $200,000 in 2017.  Of this amount, 60 percent related to development activities subsequent to the point at which criteria had been met indicating that an intangible asset existed.  As of the end of the 2017, development of the new product had not been completed.


In January 2017, the company has a gain (sales value – cost) on the sale-and-leaseback of an office building in the amount of $200,000.  The lease is accounted for as an operating lease, and the term of the lease is 5-years.


Prepare a reconciliation schedule to convert 2017 income and December 31, 2017 stockholders’ equity from IFRS basis to U.S. GAAP.  Ignore income taxes.  Prepare a note to explain each adjustment made in the reconciliation schedule.

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