Question
4. Fidelitys investment team wants to re-evaluate their international stock portfolio offered to investors. They are considering adding Highfall AG, a listed Swiss manufacturing firm,
4. Fidelitys investment team wants to re-evaluate their international stock portfolio offered to investors. They are considering adding Highfall AG, a listed Swiss manufacturing firm, to their international portfolio.
Notes to consider for reconciliation:
Highfall AG uses the FIFO inventory valuation system, which makes COGS lower and inventory valued higher, at a value of $78,000, than it would be under the US GAAP-preferred LIFO system.
Using IFRS, Highfall AG capitalizes $46,000 of development expenses as an asset on their balance sheet (remember: under US GAAP such costs would be included as operating expenses).
Using IFRS, Highfall AG reversed a prior goodwill impairment by $30,000, recognizing a gain on their income statement and an increase in the asset price. Such reversals are not allowed under US GAAP.
There were no prior period adjustments.
Required: Given the information above, please prepare a partial reconciliation for Highfall AGs financial statements from IFRS to US GAAP.
Income Statement: | Local GAAP | Debit | Credit | US GAAP |
Sales | 1,300,000 |
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COGS | 820,000 |
|
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Operating Exp. | 52,000 |
|
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Reversal of GW Impairment | 30,000 |
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|
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Net Income | 458,000 |
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Statement of RE: |
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Beg. Retained Earnings | 400,000 |
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+ Net Income | 458,000 |
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End. Retained Earnings | 858,000 |
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Balance Sheet: |
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Inventory (FIFO) | 800,000 |
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Goodwill | 200,000 |
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R&D | 46,000 |
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Total Assets | 1,046,000 |
|
|
|
Total Liability | 350,000 |
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|
|
Retained Earnings | 858,000 |
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