Jefferson Company acquired equipment on January 2, Year 1, at a cost of $10 million. The equipment has a five-year life, no residual value, and is depreciated on a straight-line basis. On January 2, Year 3, Jefferson Company determines the fair value of the asset (net of any accumulated depreciation) to be $12 million.
Required:
a. Determine the impact the equipment has on Jefferson Company's income in Years 1-5 using (1) IFRS, assuming that the revaluation model is used for measurement subsequent to initial recognition, and (2) U.S. GAAP.
b. Summarize the difference in income, total assets, and total stockholders' equity using the two different sets of accounting rules over the period of Years 1-5.