In 2022, its first year of operations, Rieter A.G. (Rieter) prepared its financial statements in accordance with IFRS (as audited by the companys auditors, KPMG Switzerland). After-tax Operating Income amounted to $1,250,000 and Shareholders Equity reported at $10,300,000. Rieter A.G.s Swiss combined income tax rate (central government statutory rate plus subcentral government rate) is 19.65%.

Rieter A.G. is interested in attracting additional external investors to help finance a major expansion. Several of the targeted investors are based in the U.S. and have asked the you to prepare a reconciliation to U.S. GAAP for the Income statement and the Shareholders Equity portion of the Balance Sheet. These investors have recommended to Rieter that they use FMV options where appropriate in IFRS.

You have identified the following items as having potentially material impact for the reconciliation process.

1. The 2022 IFRS balance sheet shows total inventory with a balance of $1,600,000. Further investigation indicates that inventory with a historical cost of $500,000 was subjected to lower-of-cost or market analysis. That portion of the inventory has replacement cost of $465,000, a current estimated selling price of $490,000, and $15,000 estimated cost to sell. The normal profit margin is 15% of selling price. Rieter A.G. uses the retail inventory method.
2. An analysis completed by a commercial property investment firm indicates the fair market value of Rieters PP&E as of December 31 is $5,100,000. All PP&E was acquired in 2022 at cost of $5,000,000 and has accumulated depreciation of $250,000 as of December 2022.
3. In 2022 Rieter incurred research and development costs totaling $260,000. Rieter can clearly distinguish the research phase from the development phase of the project. Research-phase costs amounted to $132,000 and development-phase costs are $128,000. An additional $150,000 of development costs are expected in 2023. All the IAS 38 criteria have been met for recognition of the development costs. The product is expected to be brought to market in 2023 and is expected to be marketable for five years.
4. Rieter owns a 5-acre plot of land that is currently not in use and is being held as investment property. The historical cost of the land is $1,350,000. A real estate broker conducted a comparative analysis in December and determined the fair market value of the tract is $1,425,000.
5. In 2022 Rieter began construction of a new plant that is recognized as a qualifying asset under IAS23: Borrowing Costs. Interest costs associated with construction loans amounted to $108,000. Additionally, other borrowing costs associated with the loans (bank fees, closing costs, etc.) amounted to $18,000. The interest rate on the construction loan is higher than the weighted-average interest rate that Rieter had at the time.

Requirements:

1. Reconcile the IFRS-based financial statements to U.S. GAAP using the templates on the following pages.
2. Compare the return on equity on the IFRS-based financial statements to the U.S. GAAP results.
   1. Use the following template to prepare the reconciliation of IFRS income to U.S. GAAP income. Fill it out entirely

Also show Supporting calculations for items 1-5:

Item	Adjustment	Explanation
After-tax Operating Income (IFRS)	$1,250,000
Inventory
PP&E
R&D
Invesment Property
Borrowing Costs
After- tax Operating Income (U.S. GAAP)

Use the following template to prepare the reconciliation of IFRS Shareholders Equity to U.S. GAAP Shareholders Equity.

Item	Adjustment	Explanation
Shareholders Equity (IFRS)	$10,300,000
Inventory
PP&E
R&D
Invesment Property
Borrowing Costs
Shareholders Equity (U.S. GAAP)

1. ROE Impact Analysis (Compare ROE under IFRS and U.S. GAAP)