Refer to Exhibit 156 in this chapter. Assume a United Kingdom company, Brits International, lists on both

Refer to Exhibit 15–6 in this chapter. Assume a United Kingdom company, Brits International, lists on both the London Exchange using U.K. GAAP and the New York Stock Exchange. Brits International must prepare a reconciliation from U.K. GAAP to U.S. GAAP. This reconciliation shows the following difference associated with revaluations of fixed assets:

Required:
a. Explain why the adjustment to U.S. GAAP resulted in additions to net income.
b. Explain why there are additions to shareholders’ equity and why those additions are greater than the additions to net income.
c. Explain why there is a deduction to shareholders’equity.

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Exhibit 15-6 Fixed Asset Goodwill or Amortize Impairment Auditors per Revaluation LIFO Impairment Test Depreciation Disclosure Country GAAP 10,000 FRS United States United Kingdom 211 Basis Allowed Yes No Yes No No No No No Required Yes Yes Yes Yes Allowed Economic Yes No Yes No Yes Yes Yes 93 Impairment Amortize (20 yr) Amortize (4 yr) Tax Tax 16 Germany 15 Impairment Economic/tax Impairment Amortized (20 yr) Economic Tax No No No Russia Net Income Shareholder's Equity U.K. balances U.S. GAAP adjustments: a. Additional depreciation charges $783,200 $4,767,900 47,600 326,533 that result from revaluation of assets b. Reversal of revaluation of fixed assets (523,740) $4,570,693 U.S. GAAP restatement $830,800