Stellar Bright Solar (SBS or the "Company") is a business that contracts to develop, construct, and operate solar powerplants. SBS entered into a contract to support the Big Desert solar power plant. According to the contract terms, SBS is responsible for the day-to-day operations of BigDesert as well as for general maintenance and repairs. Big Desert expects SBS to provide routine maintenance for continued operation of the plant and respond to equipment breakdowns and falures by providing immediate repairs. In addition, the terms of the contract require SBS to procure necessary materials to operate, maintain, and repair the plant. To comply with this requirement, the company must maintain a certain level of materials and supplies (the "spare parts") at all times. On a regular basis, SBS reviews a listing provided by Big Desert of recommended spare parts for various components of the solar powerplant and procures the necessary parts. Vendors deliver the parts to SBS along with a complete listing that describes the quantity and cost of the parts provided. SBS maintains this listing and uses it to (1) track expected usage of the spare parts and (2) determine their expected usefullives. The spare parts consist of customized and genericparts that vary in cost, procurem ent time, expected usage (i.e, emergency replacement, st andard replacement), and expected useful life. Big Desert uses the composite depreciation method for substantially all of the plant, and it expenses all major plant maintenance. Required: 1. With reference to US GAAP, how should SBS classify the spare parts that it expects to use within one year - as inventory or as a prepaid/other current asset? 2. With reference to US GAAP, should Big Desert depreciate the spare parts over their estimated useful lives or expense them as consumed? 3. Would your answers to questions 1 and 2 differunder IFRS rules? If so, how? Applicable Professional Pronouncements (US GAAP) ASC210-10, Balance Sheet: Overall (ASC210-10) ASC 330-10, Inventory: Overall (ASC 330-10) ASC 340-10, Other Assets and Deferred Costs: Overall (ASC340-10) ASC908-330, Airlines: Inventory (ASC908-330) Applicable Professional Pronouncements (IFRS) LAS2, inventories (IAS 2) IAS16, Property, Plant and Equipment (IAS16)