Landco reported the following additional data. Amounts for Kennedy Realty for the current year are provided for comparison. Kennedy Realty is a U.S. company that follows IFRS.

Landco Global Kennedy

(pounds sterling, in thousands) (dollars, in millions)

Total revenues ￡ 741 $ 517

Average total assets 5,577 4,696

Net income 125 297

Required:

There are several ways to compare these companies, but one way is using ratio analysis. You also know that Landco reports a revaluation surplus of ￡1,952.

1. If you assume that ￡1,550 of the revaluation surplus amount arose from an increase in the net replacement value of investment properties during the year, prepare the journal entry to record this increase.
2. Next, compute the following ratios for Landco Global and Kennedy Realty.

1. Return on assets.

2. Profit margin on sales.

3. Asset turnover.

How do these companies compare on these performance measures?

3. Based on your analysis using IFRS standards, are Landco’s assets and equity overstated as compared to Kennedy’s? If so, why or why not?
4. What types of adjustments did you make in order to have a more valid comparison of ratios between the two entities?