30. The global equities team at your bank is considering investing in Remy Corporation. Remy uses IFRS and capitalizes product development costs when they meet the criteria laid out in IAS 38. You have been assigned to convert several of Remys financial metrics to a U.S. GAAP basis. To perform your analysis, use the following information, taken from Remys financial statements for the past three years. in millionsof euros

Year 1 Year 2 Year 3 Research and development expenditures 2,500 3,000 3,600 Development costs capitalized from annual income statements: 1,000 1,240 1,300 Pretax profit under IFRS from year-end balance sheets: 7,400 9,800 9,500 Total assets under IFRS from annual statements of cash flow:78,000 80,000 84,000 Operating cash flow under IFRS 5,000 5,300 4,800

As a starting point, you have reviewed descriptions of Remys R&D activities and concluded that all R&D expenditures would be expensed as incurred under U.S. GAAP. Your team leader has told you to make the following additional assumptions to simplify your analysis: All R&D expenditures occur on the last day of the fiscal year. Capitalized development costs have a 2-year useful life. Products resulting from capitalized development costs are released to the market on the first day of the subsequent fiscal year. For instance, if 100 is capitalized as a development cost asset on December 31, amortization of the development cost asset begins the next day, on January 1 of the following year. Apart from capitalizing development costs, all of Remys other accounting policies conform to U.S. GAAP. Required: a. Under the foregoing assumptions, how much pretax profit would Remy Corporation have recorded under U.S. GAAP in Year 3? b. Remy Corporations fiscal year ends on December 31. Compute the value of total assets under U.S. GAAP as of December 31, Year 3. c. Compute Remy Corporations operating cash flow under U.S. GAAP for Year 3.