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A South African public company constructed a warehouse during 20X1. Costs involved in building the warehouse (or incurred after construction) included, among others: Payment of

A South African public company constructed a warehouse during 20X1. Costs

involved in building the warehouse (or incurred after construction) included, among others:

Payment of wages and benefits to construction workers, who were already employed by the company ($3

million).

Exterior paint for the building ($80,000).

A test production run, in which the plant tested its ability to produce its products ($100,000).

Payment of wages to construction workers for service issues arising after the plant was placed in service

($200,000).

In 20X2, an appraisal by the company's local tax assessor indicated that the building's value had increased by $5

million.

1. Determine whether the company is subject to the requirements of IFRS (based on the home country). Cite your

source for this determination.

2. Locate the relevant guidance, then determine which of the above-listed costs may be included in the initial

measurement (i.e., capitalized value) of the plant when the plant is first recognized in 20X1, citing your sources.

Certain costs may be addressed directly by the guidance; others may require judgment in applying principles

from the guidance.

3. Determine whether the property's value should be adjusted in year 2 (20X2).

4. Using an IFRS/U.S. GAAP comparison guide, state how your response to question 3 would differ if this com-

pany had been subject to U.S. GAAP. Cite the source for your response.

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