2. Plant, Property and Equipment

On January 2, 2016, SaulGroup purchased equipment at a cost of $5 million. The equipment has a five-year life, no residual value, and is depreciated on a straight- line basis. On January 2, 2018, the fair value of the equipment (net of any accumulated depreciation) is determined as $6 million.

a. If the revaluation model is applied for measurement subsequent to initialrecognition under IFRS, what is the impact the equipment has on SaulGroups

income in Years 2016 2020 using (1) IFRS and (2) U.S. GAAP? b. How would you explain the difference in income, total assets, and total

stockholders equity using IFRS and U.S. GAAP over the period of Years2016 to 2020?

3. Research and Development

In 2016, SaulGroup spent $1 million in developing Product Y. Of this amount, 30% related to development cost (IAS 38 criteria had been met for recognition of the development costs as an intangible asset). The development of Product Y was complete, and the product was available for sale on January 2, 2017. Sales of the product are expected to continue for five years. Straight-line method is used.

a. What is the impact the research and development costs have on SaulGroupsin 2016 and 2017 income under (1) IFRS and (2) U.S. GAAP?

b. How would you explain the difference in income, total assets, and totalstockholders equity related to Product Y using IFRS and U.S. GAAP over the year 2016 and 2017?