You have recently joined a firm of accountants and have been asked to advise different clients. The clients prepare their financial statements under IFRS standards. However, they are considering changing to the use of US GAAP. The finance directors of four different clients have sought your help with the following issues, which will have an impact on the financial statements for the year ending 31 December 2020.

Issue 1 Shooting stars plc often sponsors professional football players in an attempt to improve its brand image. At the moment, it has a three-year agreement with one football player who is currently ranked in the UKs top 10 players. The agreement is that the player receives a signing bonus of 30,000 and earns an annual amount of 50,000, paid at the end of each year for three years, provided that the player wears a hat with Shooting stars log on at the pressconference of every game, play a specified amount of games each year and attend photo/film sessions for advertising purposes. The different payments are not interrelated.

Issue 2 Green energy plc has built solar panel farm with the purpose of testing the efficiency of its prototype solar panel. Green energy has applied to the regulators for approval for production of its new prototype but has only received permission to test the prototype solar panel. The solar panel farm development will enable Green energy to test the reliability of the new solar panels, which should assist in developing more efficient and cost-effective offshore oil rigs (instead of producing electricity with diesel engines). As yet, however, there has not been any commercial production of the prototype solar panels as there is still some doubt about over the panels durability in extreme weather conditions. The renewable energy generated during the testing phase of the solar panels is sold to the national regulator of electricity. There is a sufficient resource to complete the solar panels project, but the energy income has not been included in managements resource planning.

Issue 3 During 2020, Digital plc incurred legal fees of 100,000 in connection with an unsuccessful defense of a patent. The patent had been acquired at the beginning of the previous financial year (i.e. 1st January 2019) for 400,000 and was being amortised over a five-year period. Because of the unsuccessful litigation, the patent was considered worthless at the end of the year.

Issue 4 On 1st January 2017, Busy Bees plc acquired for 4,000,000 an intangible asset (trademark) that they perceived they would use indefinitely. However, they were facing difficultly in determining its useful life and they decided to amortise it over a 10year period, with the straight-line method. In December 2020, a competitor revealed a product which, when launched, will significantly reduce demand for the Busy Bees product that is associated with the intangible asset. At as of the year end date, Busy Bee assesses the recoverable amount of the intangible asset at 600,000 and they intend to continue manufacturing the underlying product for another three years.

REQUIRED:

Address each of these queries above, showing your calculations where appropriate and explaining the accounting treatment by reference to IFRS Standards. Each client also asks if the treatment for each case would be different under US GAAP.