Lombardo Group is preparing to adopt IFRS. It is preparing its opening statement of financial position on

Question:

Lombardo Group is preparing to adopt IFRS. It is preparing its opening statement of financial position on January 1, 2012. Lombardo identified the following accounting policy differences between IFRS and its previous .
1. Lombardo had not made a provision for a warranty of €75,000 under previous because the concept of a “constructive obligation” was not recognized.
2. Under previous , €60,000 paid for certain architect fees was not capitalized into the cost of a building that was put into service at the beginning of 2011, even though those costs were necessary to bring the asset to its working condition. The building has a 40-year life, no residual value, and Lombardo uses straight-line depreciation.

Instructions
(a) Prepare the journal entries (if any) needed before preparation of Lombardo’s opening statement of financial position.
(b) Determine the net change in equity from these adjustments.
(c) Brief describe the disclosures that Lombardo will make related to the adjustments in it first IFRS financial statements.

GAAP
Generally Accepted Accounting Principles (GAAP) is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC). While the SEC previously stated that it intends to move from U.S. GAAP to the International Financial Reporting Standards (IFRS), the...