ABC Ltd., a private company, can report in accordance with either ASPE or IFRS. On January 1, Year 1, it acquired an asset at a cost of $11.1 million, which will be amortized on a straight-line basis over an estimated useful life of 25 years. On January 1, Year 3, the company hired an appraiser, who determined the fair value of the asset (net of accumulated depreciation) to be $13.8 million. The estimated useful life of the asset did not change.

  Required:

(a)Determine the depreciation expense recognized in Year 2, Year 3, and Year 4 under

(i) The revaluation treatment allowed under IAS 16, and

      IAS 16  

Year 2$       

Year 3$       

Year 4$     

 

(ii) ASPE.

      ASPE  

Year 2$       

Year 3$     

  Year 4$     

 

(b) Determine the carrying amount of the asset under the two different sets of accounting requirements at January 2, Year 3; December 31, Year 3; and December 31, Year 4.

     Jan 2/Yr3   

 Dec31/Yr3  

 Dec31/Yr4 

 

(c) Determine the differences in profit and shareholders' equity over the 25-year life of the asset using the two different sets of accounting requirements. Assume that future appraisals indicated that the fair value of the asset was equal to carrying amount.

    Difference in profit$     Difference in shareholders' equity$