Andrew Ltd. is a large private company owned by the Andrew family. It operates a number of ski resorts in a very competitive industry. Its main competition comes from a couple of public companies. Andrew has been using ASPE in the past but has come under pressure from its bank to convert to IFRS. Its bank is particularly concerned with the debt to equity ratio and the return on total shareholders equity.

Andrew reported the following on its preliminary Year 6 financial statements in compliance with ASPE:

Net income	$5,600	Total debt	$44,700
		Total shareholders equity	34,800

You have identified four areas in which Andrews accounting policies could have differences between ASPE and IFRS. Where choices exist under ASPE, Andrew has adopted allowable policies that maximize net income and shareholders equity.

The controller at Andrew provides the following information for the four areas:

Intangible Assets

Andrew owns a number of intangible assets and depreciates them over their useful lives, ranging from three to seven years. The patents are checked for impairment when there is an indication that impairment may exist. Relevant values pertaining to these patents were as follows:

	December 31, Year 5	December 31, Year 6
Carrying amount before impairment	$19,800	$16,300
Undiscounted future cash flows	20,100	16,350
Value in use	16,900	12,000
Fair value	16,800	11,500

Property, Plant, and Equipment

Andrew acquired equipment at the beginning of Year 4 at a cost of $2,550. The equipment has an estimated useful life of 10 years, an estimated residual value of $115, and is being depreciated on a straight-line basis. At the beginning of Year 6, the equipment was appraised and determined to have a fair value of $2,200; its estimated useful life and residual value did not change. The company could adopt the revaluation option in IAS 16 to periodically revalue the equipment at fair value subsequent to acquisition.

Research and Development Costs

Andrew incurred research and development costs of $200 in Year 6. Of this amount, 40% related to development activities subsequent to the point at which criteria indicating that the creation of an intangible asset had been met. As of year-end, development of the new product had not been completed.

Redeemable Preferred Shares

In Year 4, Andrew issued redeemable preferred shares to the original founders of the company in exchange for their previously held common shares as part of a tax planning arrangement. The preferred shares were assigned a value of $750 and have been reported in shareholders equity in the preliminary financial statements. The common shares, which had a carrying amount of $750, were cancelled. The preferred shares would be classified as long-term debt under IFRS and would need to be reported at their redemption value of $3,100.

The CEO is concerned about the impact of converting Andrews financial statements from ASPE to IFRS.

Required

(a)	Calculate the two ratios first using ASPE and then using IFRS. Prepare a schedule showing any adjustments to the numerator and denominator for these ratios. Ignore income taxes.
(b)	Explain whether Andrews solvency and profitability look better or worse under IFRS after considering the combined impact of the four areas of difference.