Here's the following information for a question i need to be done. I need help setting up the income statment below and below the income statement is the answers to the questions:

Carlson International, Ltd.

Comparative Income Statements under IFRS and U.S. GAAP

For the year ended December 31, 2021

	IFRS	US GAAP
Net Income under IFRS and US GAAP before accounting differences	$8,000,000	$8,000,000
Add (Subtract) Adjustments:
IAS 2: Inventory
Adjusted Net Income under IFRS and U.S. GAAP	XXXXXX	XXXXXX

Here's the answers to the question to help set up the income statement above:

1. IFRS

The IFRS is a set of standards developed by the International Accounting Standards Board (IASB). The IFRS govern how companies around the world prepare their financial statements. Unlike the GAAP, the IFRS does not dictate exactly how the financial statements should be prepared, but only provides guidelines that harmonize the standards and make the accounting process uniform across the world.

2. GAAP

The GAAP is a set of principles that companies in the United States must follow when preparing their annual financial statements. The measures take an authoritative approach to the accounting process so that there will be minimal or no inconsistency in the financial statements submitted by public companies to the US Securities and Exchange Commission (SEC). This enables investors to make cross-comparisons of financial statements of various publicly-traded companies in order to make an educated decision regarding investments.

IAS 2: Inventories

1. Treatment of inventory

One of the key differences between these two accounting standards is the accounting method for inventory costs. Under IFRS, the LIFO (Last in First out) method of calculating inventory is not allowed, while under the GAAP, either the LIFO or FIFO (First in First out) method can be used for estimating inventory.

The reason for not using LIFO under the IFRS accounting standard is because it does not show an accurate flow of inventory and may portray lower levels of income than is the actual case. On the other hand, the flexibility to use either FIFO or LIFO under GAAP allows companies to choose the method that is most convenient when valuing inventory.

Under GAAP, the lower of cost or market method defines the market price to be the cost of replacing an item, but it cannot exceed an item's net realizable value, or NRV, nor fall below the NRV reduced by your normal sales margin. GAAP defines NRV to be the estimated selling price minus any costs necessary to ready the inventory item for sale.

Under IFRS, you remeasure inventory using the lower of cost and NRV method; you do not include your normal sales margin in the calculation.

For US GAAP Inventory :

Cost - 1250000 , NRV ( Ceiling )= 90000 , Lower NRV ( Floor) = 90000 -20 % of NRV = 72000 So , Value will be $ 125000 as per GAAP

Under ifrs - Cost - 1250000 or MArekt value = 95000 w.e.lower i.e $ 95000 as per ifsr.

IAS 16: PP&E In the area of fixed assets and the resultant depreciation there are some major differences between the GAAP rules codified in ASC Topic 360 and the IFRS rules in IAS 16.

In GAAP there is only one way to initially record a fixed asset and that is the cost method. The cost method involves recording the acquisition cost of the fixed asset, plus the costs of bringing the fixed asset to the condition and location required for its use. That would include interest on any loans, physical construction of the asset, demolition of any pre existing structures, renovation of a preexisting structure, administrative and technical activities in designing the asset and obtaining permits, and administrative activities incurred during construction. Revaluation is not allowed.

Subsequent to recording the cost of the asset, under IFRS there are two ways to continue recording the fixed asset: the cost model and the revaluation model. The cost model must be applied consistently to classes of assets. The revaluation model is very dynamic, but more difficult to use. To use the revaluation model, an entity must be able to determine fair value reliably. So, the fair value should be adjusted either upward or downward as required. And what is a major break from GAAP, an upward adjustment can be recorded in the books. An increase in value is measured in "comprehensive income" and in the equity section of the balance sheet. A decrease in value is posted to the profit and loss statement.

a)	Cost of building	$3250000
b)	Useful Life	25 yrs
c)	Estimated residual value of	$250,000
d)	Fair value on Jan 2019	$3850000
	US GAAP	12/31/2018	12/31/2019
e)	Depreciation per yr ( a- c) / b	120000
f)	Book value ( beginning)	$3250000	3130000
g)	Less : Depreciation	120000	120000
h)	Book value ( ending) ( f-g)	3130000	3010000
	Under IFRS
a)	Book value ( 01/03/2018 )	$3250000
b)	Less : Depreciation	120000
c)	Book value ( 12/ 31/2018 )	3130000
d)	Revalue figure ( 01/01/2019)	$3,850,000
e)	Gain on Revaluation ( d- c)	$720000
f)	Remaining useful life ( 25 -1 )	24 yrs
g)	Estimated residual value of	$250,000
h)	Depreciation for 2019 ( d - g) / f	150000
	Book value ( 12/31/2019) ( d- g )	3700000

IAS 36: Impairment IAS 36 Impairment of Assets prescribes one-step test of impairment. The entity should compare asset's carrying amount with its recoverable amount (higher of asset's fair value less cost to sell or asset's value in use).

As opposed, US GAAP applies 2-step approach: the first step is to compare asset's carrying amount with its undiscounted cash flows and if carrying amount is lower, then no impairment loss is recognized. In the second step, if the carrying amount is higher than undiscounted cash flows, an impairment loss is calculated as a difference between carrying amount and assets fair value.

So, asset might be impaired per IAS 36, but not per US GAAP. Also, IFRS uses discounted cash flows in impairment testing (for value in use calculation), whereas US GAAP uses undiscounted cash flows. IFRS sets more precise requirements for types of items to include in cash flows than US GAAP. Therefore, a difference in amount of impairment loss can arise.

US GAAP	IFRS
asset's carrying amount	75000	asset's carrying amount	75000
Fair value ( undiscounted cash flows)	68,000	Recoverable amt :	65000
		Higher of -
		value in use ( discounted cash flows)	60,000.
		Fair value	65,000
Impairment ( since Fair value is lower)	7000	Impairment ( since recoverable amt is lower)	10000

IAS 38: Development Costs

One of the biggest differences in this area is that US GAAP does not permit to capitalize internally incurred development costs, while IFRS does allow itwhen certain conditions in line with IAS 38 are fulfilled.

Also, there are some differences in impairment testing with regard to intangible assets with indefinite useful life. These differences may result in determination whether there is an impairment loss and in earlier recognition in IFRS.

So , under US GAAP the entire development cost will be written off in p/l - 250000

Whereas in IFRS , 60% will be capitalise don the assumption that it has met the criteria = 250000 * 60% = 150000