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 SaulGroups in 2016 and 2017 income under (1) IFRS and (2) U.S. GAAP?

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

4. Intangible Assets In 2014, SaulGroup acquired a brand with a fair value of $100,000. The brand is classified as an intangible asset with an indefinite life. At the end of 2016, the estimated selling price of the brand is $80,000 with zero selling cost. Expected future cash flows from continued used of the brand are $120,000, and the present value of the expected future cash flows is $70,000.

a. Determine the amount of impairment loss, if any, to be recognized in the year 2016 under (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 year 2016 and 2017?