1. BREAKING NEWS!!! We have just had contact with beings from Outer Space!!! We have just learned that there is a thriving economy on the far moon of Endor and on its neighboring planet of Vulcan!!! The 1 billion Endorians all speak one language and are very interested in doing business with Earth!!! Amazingly, Endorian accounting is quite similar to that found on Earth, but of course, their language is very very different. As the newly elected head of the IFRS/GAAP Convergence Committee, you are presented with 4 possible solutions for dealing with our new trading partners

A.Continue to allow multiple languages for financial statements. This is the recommendation of Madam JarJar head of the United Nations.

B. Require English to be the official language of business throughout the galaxy. This is the recommendation of Vadar, head of the International Monetary Fund

C. Require Endorian to be the official language of business throughout the galaxy. This is the recommendation of Yoda, head of the Endorian treasury.

D. Develop a hybrid language Spaceballs which is a mixture of Earth languages and Endorian to be the official language of business throughout the galaxy. This is the recommendation of Professor C3P0, head of linguistics at The University of The Hoth System.

REQUIRED.

i.Write memos to our 4 distinguished representatives explaining why you have accepted or rejected their recommendation.

ii.Discuss what steps (if any) and how they are to be funded to accomplish your recommendation.

2. Homer Simpson, the King of Endor, has quickly learned of something we have on earth which they dont have on Endor and that is taxes. Homer is asking your advice on how is the best way to tax the Endorians, should it be a VAT tax or an income tax? If it is a VAT tax, do you waive the tax for items sold to earthlings? If it is an income tax, do you tax citizens, residents and/or the source? From your research, you know that the Endorian economy would be the 5^th largest economy on earth.

3. Before finding earth, the only foreign transactions the Endorians ever had was with the Vulcans. The Vulcan economy has always been very stable with little to no inflation, therefore; Endor accounting only has one method for handling foreign currency. This method is similar to our method when the foreign currency is functional. Against the advice of family, friends and the music loving people of the galaxy, Mr. Spock, the treasurer of Vulcan has resigned to pursue a career on The Voice, Dancing with the Stars, and Big Brother. This has sent shock waves throughout the Vulcan economy and massive inflation has begun there. All the experts believe that after 5 years of trying out (and being kicked off) all these talent shows, Mr. Spock will return to Vulcan and restore stability to their economy.

Do you think the Endorian method is best when inflation is not a problem?

Do you think the monetary/nonmonetary method is best when inflation is a problem?

If Endorian Companies were in the US they would be forced to switch method for the 5 years Mr. Spock tortures the music-loving galaxy and then switch back when stability comes to Endor. Do you think companies should have to switch and lose consistency? Explain your answer.

4. At the first joint meeting of the FASB, IASB, and EASB (Endorian Accounting Standards Board) the controversy over inventory arose. The EASB allows LIFO and NIFO (next in first out) which values inventory at the price of acquiring the next unit. Their argument is that this is the minimum price at which the merchandise would be sold, and obsolete inventory would have no value. FASB allows LIFO but not NIFO and of course, IASB does not allow either one. The US-IRS has stated that they will NOT change their policy regarding the requirement of LIFO for books if it is used for taxes, thus any removal of LIFO from GAAP would cause an increase in taxes for US Companies. For some unknown reason (maybe they listened to too much of Mr. Spocks singing) they have come to you for advice. Should NIFO be allowed for financial accounting purposes why or why not? Should LIFO be allowed for financial accounting purposes why or why not? DEFEND your answer including the impact these methods have on income statements, taxes and balance sheets.

5. Endorian accounting has no mechanism for lower of cost or market for inventory. James Bond the 007^th assistant to the king has come to you for advice. Should Endor use only net realizable value to determine write-downs of inventory (IFRS) or should they use the 3 market measures used in the US? Should they allow write-ups of previously written down inventory and should they allow a write-up above original cost? DEFEND your position

6. The Greedy American Company has 3 factories. Information about the 3 factories are as follows:

a. US FACTORY,,, Memphis TN (CEO Austin Powers) capacity 20,000 printers currently making and selling 14,000 printers at $500 each. It costs Memphis facility$300 to make a printer.

b. GERMAN FACTORY,,,, Munich Germany (CEO Justin Bieber) capacity 20,000 printers currently making and selling 13,000 printers at $480 each. It costs Munich factory $315 to make a printer.

c. ENDORIAN FACTORY,,,,LEIA-TOWN (CEO Jessica Simpson) CAPACITY 20000 printers currently making and selling 12,000 printers at $450 each. It costs Leia-town $335 to make a printer.

i.What is the income of each company? The Greedy American Company is going to distribute $50,000 in bonuses to the 3 factories, how much do you give each CEO? Defend your answer.

ii.On 1/1/18, Dr. Evil the new king of Endor, has approached his medical school friend Jessica Simpson (yes, she went to medical school) about purchasing 8000 printers for the Endorian Government at $480 each. Dr. Evil insists that the sale be recorded through Leia-town, but doesnt care where the printers are manufactured. Currently, there is a 10% excise tax (on the cost) of any products coming from America into Endor. As head of Greedy Company how do you acquire the 8000 printers to sell to the Endorian government? What is the new income for each company? Greedy is again giving $50,000 in bonuses; how do you divide the bonus among the 3 CEOs? Defend your answer.

iii.On 1/1/20 the excise tax between the US and Endor has ended. How do you supply printers to the Endor Government in 2020? What is the income of the 3 divisions now and how do you distribute a $50,000 bonus in 2020.

7. Which financial statement should be most important and why? Should financial statements focus on the short term or the long-term? Why?

8. Under GAAP when a company installs safety and/or pollution devices in excess of what the law mandates, it is treated as part of the asset. However, under IFRS these additional expenditures must be expensed immediately. Which method do you prefer and why? What is the implication on the balance sheet and income statement both in the year the expenditure is incurred and the year after.

9. An American Company borrowed 1 million Canadian dollars to finance the construction of a new office building when the Canadian dollar was worth $1 American. At 10% interest, the American Company expected to pay back 1.1 million Canadian dollars which would be 1.1 million American dollars. Unfortunately, based on changes in the value of the Canadian dollar, the American Company must pay 1.1 million Canadian dollars but this costs the American Company 1.3 million American dollars. How will this extra $200,000 difference between what they actually paid and what they expected to pay be shown under U.S. GAAP? How would this have been shown if the American Company used IFRS? Which gives more relevant information to investors? Defend your choice.

10. Endor has lots of coal. Big Coal, and American Company purchases the rights to mine the Far-Moon-of-Endor from the Endorian government for $100,000,000. At the time, Big Coal expected to generate $30,000,000 annually for 20 years from this coal mine, thus making it a great investment. Unfortunately, the next year Earth passes strict new pollution laws which greatly reduces the demand for Big Coals coal. Big Coal correctly determines that its mining rights are impaired and writes it down to $12,000,000. Two years later, Yoda Company releases to the market a new device which permits the burning of coal with NO POLLUTION! Earthlings now want your coal again and you expect to generate $30,000,000 per year for the remaining years. The present value of this new income stream is $500,000,000. Under GAAP what do you do when the Yoda device is acquired and you start selling lots of coal again? Under IFRS what do you do when Yodas device is acquired and you start selling lots of coal again? Which approach GAAP or IFRS gives us investors more relevant information? Defend your answer.