Question
Addison Company acquires a frontloader for $500,000. The useful life of the frontloader is 10 years. The treads with a value of $50,000 will need
Addison Company acquires a frontloader for $500,000. The useful life of the frontloader is 10 years. The treads with a value of $50,000 will need to be replaced every five years. The blade has a value of $20,000 and needs to be replaced every two years. At the end of year one what would be the minimum difference in depreciation expense using IFRS and the normal practice followed in US GAAP?
a. None of the above.
b. The depreciation expense would be higher using US GAAP by $13,000
c. Using a composite life of 10 years there would be no difference. Depreciation expense would be $50,000 using both US GAAP and IFRS.
d. The depreciation would be higher using IFRS by $13,000.
e. Based on conservatism the frontloader would be depreciated over 2 years for IFRS and 10 years for US GAAP. Thus, the difference would be $200,000.
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