Figure LLC prepares its consolidated financial statements in accordance with U.S. GAAP. At 1/1/2018, the company had total equity of $1,100,000: retained earnings of $1,000,000 and common stock of $100,000. For the year ended 12/31/2018, the company reported net income of $800,000.

All of the targeted investors are based in Europe and they have asked the companys accountants to prepare reconciliation schedules that covert the companys yearly income for 2018 and the December 31, 2018, stockholders equity section of its balance sheet from U.S. GAAP to IFRS.

The following items have been identified as being potentially material for your reconciliation exercise:

1. At 12/31/2018 the historic cost of inventory under both the LIFO and FIFO methods was $320,000. The U.S. GAAP accounts use LIFO, and the IFRS reconciliation will use FIFO. At 12/31/2018, the U.S GAAP accounts impaired inventory to $280,000. At year end, this inventory had a $280,000 replacement cost, an estimated selling of $315,000, with $15,000 cost to sell. The normal profit margin on inventory is 10%.

2. The balance sheet at 12/31/2018 includes office property acquired during 2018 at a historical cost of $2,000,000. Accumulated depreciation of $200,000 had been charged on these properties at the balance sheet date. The fair market value of these properties as at 12/31/2018 was $3,000,000. Assume that the external investors prefer IAS 16s fair value option for measuring assets.

3. The company incurred research and development costs of $800,000 during 2018. Of this amount, 50% related to the development of a new production process that fulfilled all of the criteria for recognizing an intangible asset under IAS 38. As of the end of 2018, development of the new production process was incomplete.

4. During 2016, Figure incurred $600,000 of development costs related to a new product. This expenditure fulfilled all of the criteria for recognizing an intangible asset under IAS 38. The company started selling the product in January 2017 (hint: when we start to amortize the development asset) and expects it to be marketable for 5 years.

5. Figure owns a plot of land that held as an investment property. The historical cost of the land was $400,000. A real estate broker conducted a comparative analysis on 12/31/2018 and determined the fair market value of the land was $900,000.

6. The companys plant was tested for impairment on 10/31/2018. On this date, the companys plant and equipment had the following characteristics:

Net book value (i.e. carrying value)	$1,000,000
Fair value (i.e. selling price)	$700,000
Costs of asset disposal	$50,000
Expected future cash flows from use	$900,000
Present value of expected future cash flows	$600,000

Note: the impairment has already been accounted for in the U.S. GAAP financial statements

7. In early January 2018, Figure realized a $200,000 gain on the sale and leaseback of an office building. The lease is accounted for as an operating lease, and the lease term is for 20 years.

8. During 2018, Figure entered into a 5-year lease agreement for a fleet of motor vehicles with five annual lease payments of $33,289 each. Each annual payment is due on the last day of each year. The present value of the minimum lease payments at the time of executing the lease were $120,000 (using an implicit annual discount rate of 12%). All vehicles had a useful life of 5 years. The fair market value of the vehicles at the start of the lease equaled $130,000. Under U.S. GAAP, Figures 12/31/2018 balance sheet showed leased assets of $96,000 ($120,000 basis less $24,000 accumulated depreciation) and lease liabilities of $101,111 ($120,000 + $14,400 effective interest less the $33,289 annual lease payment). The Interest expense related to lease amortization on the 2017 U.S. GAAP income statement amounted to $14,400.
9. Prepare a reconciliation schedule that coverts Figures 2018 net income calculation prepared under U.S. GAAP to IFRS (ignore taxation).

1. Prepare a reconciliation schedule that coverts Figures December 31, 2018, stockholders equity balance from U.S. GAAP to IFRS.

2. Discuss whether your calculations for 2018 income and December 31, 2018, Stockholders equity under IFRS provide potential investors with more useful information about the companys current performance and future prospects than those drafted under U.S. GAAP. Show all work