Bess Ltd is an Indonesian based company that prepares its financial statements using U.S. GAAP. The company's financial results at 31 December 2017 were as follows: Net profit Shareholder's Equity Total Assets Net cash flows from operating activities $1,000,000 8,000,000 9,000,000 1,600,000 Bess Ltd has expanded its operations into Australia and is considering raising capital in Australia. Bess Ltd approached a private venture capital firm for a $5,500,000 loan. The venture capital firm uses a ratio to assess the Company's ability to generate cash flows from operations. The ratio is as follows: Net cash flows from operating activities to net profit ratio [net cash flows from operating activities/net profit]. The generally acceptable ratio is 1.5. You as the accountant of Bess Ltd, have noted the policy differences between the accounts which have been prepared based on U.S. GAAP in Indonesia and what is required under IFRS in Australia. . The venture capital firm uses IFRS as the basis for its decisions. Bess Ltd must now translate some of its accounts into IFRS. Adjustments relating to this question are summarised below. Additional Information: 1 3. The company used the LIFO method for inventory valuation. IFRS only permits the use of FIFO method. The inventory valuations for the current and previous period are as follows under the two methods LIFO FIFO Current Period $800,000 $600,000 Previous Period $750,000 $500,000 The company engages in research and development activities and during the current financial year it paid $350,000 for research and development. It had expensed the entire amount in its Profit & Loss Statement. However, $150,000 of the total amount qualifies to be capitalised under IFRS. Interest received of $500,000 have been included in cash flow from operating activities. Traditionally, interest received was classified as a financing activity and the company does not have any significant reason for a policy change. Two years ago the company had acquired goodwill in a business combination. The amount of Goodwill was $500,000. The company amortises goodwill over a ten year period. An amortisation expense of $50,000 was recorded in the current period as well as accumulated amortisation of $50,000. IFRS does not permit amortisation of goodwill The company had invested in 200,000 shares in a listed company which were purchased at $2.00 each at the beginning of this year. The shares were trading at $2.50 each on 31 December 2017. 13