Sigma Company is a U.S.-based company that prepares its consolidated financial statements in accordance with U.S. GAAP. The company reported income in 2020 of $6,000,000 and stockholders equity at December 31, 2020, of $50,000,000.

If you were the CFO of Sigma and has learned that the U.S. Securities and Exchange Commission is considering requiring U.S. companies to use IFRS in preparing consolidated financial statements. The company wishes to determine the impact that a switch to IFRS would have on its financial statements and has engaged you as CFO to prepare a reconciliation of income and stockholders equity from U.S. GAAP to IFRS. You have identified the following three areas in which Sigmas accounting principles based on U.S. GAAP differ from IFRS.

1. Restructuring

2. Revenue recognition

3. Bonds payable

You have identified the following information with respect to each of these accounting differences.

Restructuring Provision

The company publicly announced a restructuring plan in 2020that created a valid expectation on the part of the employees to be terminated that the company will carry out the restructuring. The company estimated that the restructuring would cost $400,000. No legal obligation to restructure exists as of December 31, 2020.

Revenue Recognition

The company entered into a contract in 2020 to provide engineering services to a long-term customer over a 12-month period. The fixed price is $250,000, and the company estimates with a high degree of reliability that the project is 30 percentcomplete at the end of 2020.

Bonds Payable

On January 1, 2009, the company issued $12,000,000 of 5 percent bonds at par value that mature in five years on December 31, 2013. Costs incurred in issuing the bonds were $500,000. Interest is paid on the bonds annually.

Required

Prepare a reconciliation schedule to reconcile 2020 net income and December 31, 2020 stockholders equity from a U.S. GAAP basis to IFRS. Ignore income taxes.

Prepare a note to explain each adjustment made in the reconciliation schedule.