for the company you selected in unit 1 compare and contrast the following pronouncem 3588348
For the company you selected in Unit 1, compare and contrast the following pronouncements and the current GAAP standards:
- Income Taxes (IAS 12)
- Leases (IFRS 16)
- Financial Instruments (IFRS9)
Make any necessary updates to the financial statements based on your understanding of the new IFRS.
Impact Analysis Chart
|Describe what the company is currently doing under GAAP.
|What changes will occur under IFRS?
|How will the transition to IFRS impact the company?
|IFRS 1: First-time Adoption of International Financial Reporting Standards
|Apple Inc. has complete set of financial statements covering its first IFRS reporting period and the preceding year.
|Apple Incorporation will be granted limited exemptions from the general requirement to comply with each IFRS effective at the end of the companies first IFRS.
|Apple Incorporation will be forced to use IFRS declare its financial result within the United States as it does for its foreign business units.
|IFRS 15:Revenue from Contracts with Customers
|Apple reports deferred revenue in addition to revenue the company is entitled to.
|Apple Incorporation will have to report only on revenue it is entitled to from its customers
|Apple Inc. will require more time in reconciliation of revenue from its foreign business units
|IAS 1:Presentation of Financial Statements
|Apple Inc. presents its income statement, balance sheet and statement f cash flow as required
|The company will be required to present complete set of financial statements.
|The company will need more time for the compilation of the reports given that its foreign units operate under a completely different fiscal-year ends.
|IAS 7: Statement of Cash Flow
|The company’s statement of cash flow includes details of both cash and cash equivalents.
|In addition to showing cash and cash equivalents, the company will also be required to provide historical changes of the same.
|The company will be required to track real-time changes in cash and cash equivalents
|IFRS 13:Fair Value Measurement
|The company has provided a quantitative sensitivity analysis fir its recurring fair value measurements.
|There will be no change as the definition of fair value measurement under GAAP is the same as under IFRS
|There will be no impact as definition of fair value measurement remains the same in both cases
|IAS 2: Inventory Accounting
|The company’s inventory valuation is captured as the lesser cost value
|The company will be required to report its inventory valuation as the net realizable value
|The company will be able to capture when its inventory backs up and appreciates in value
|IAS 16: Property, Plant and Equipment
|Apple Incorporation does not include details such as depreciation.
|Value of depreciation is mandatory and companies are permitted to include their investment property at fair value
|There will be no significant impact on Apple.
|IFRS 9: Financial Instruments
|Apple Incorporation presents accounts of equity method investments.
|Financial instruments such as investments held by companies are exempt from using equity method.
|There will be no significant effect on Apple.
|IAS 12: Income Taxes
|The company discloses all its income tax expenses
|Allows for deferred tax.
|The company will be able to proactively respond to fluctuating foreign exchange rates in its foreign subsidiaries by recording deferred tax until correctly determined
|IAS 17: Leases
|Apple Incorporation presents its lease asset and lease liabilities on its balance sheet
|Inclusion of lease assets and lease liabilities will not be compulsory for a period of up to 12 months
|There will be no significant impact on the company
|IAS 10: Events After the Reporting Period
|Apple Incorporation evaluates events reporting period through the date that its financial statements are issued.
|Events after the reporting period must be evaluated through the date that the financial statement are authorized to be issued.
|There will be no significant impact on the company
Comparison and contrast of (IAS2), (IAS16) AND (IFRS 13)
Gener be reliable based on the market values. It also states that the company must conduct regular internal audits and keep record of them.
Comparison and contrast of Inventory costing method (IAS2), Valuation of the property plant and equipment (IAS16) AND Fair value measurement standards (IFRS 13) of Apple Incorporation. A Summary of the financial statement has also been included based on the understanding.
|Inventory costing method (IAS2)
|Valuation of the property plant and equipment (IAS16)
|Fair value measurement standards (IFRS 13)
|Summary of the Financial statement based on the understandings
|Inventory valuation is captured at the lower of cost and net realizable value (NRV) (Robin, 2016)
It also outlines acceptable methods of defining cost including First in First out (FIFO) and weighted average cost. This is in line with the complete sets of financial statements covered in its first IFRS reporting period and preceding year.
Inventory valuation will provide the procedure for calculating the expenses incurred.
|IAS 16 initiates the principle for recognizing property, plant and equipment as assets.
It measures the significant amount of the property, accounts for depreciation charges and measuring the losses incurred. This is in line with Events After and Reporting period. The company is expected to make a statement of the loss and expenses incurred.
Valuation of the property plant and equipment are for use in production or supply of goods for administrative purposes.
|IFRS 13 outlines fair value and sets a basis for measuring fair value (Glover et al 2016).
This principle is applicable when another standard licenses fair value measurement. As the company will require to make a presentation of its income statement, balance sheet and cash flow to its stakeholders and creditors, internal revaluation as per current market value will be very significant.
Suitable for financial forecasting and historical volatility.
|Inventory valuation, valuation of the property plant and equipment and fair value measurement standards are useful to in presenting to potential stockholders and creditors. This will be helpful in making long-term decisions, financial decisions as well as keeping record.
It is significant for companies to keep records for inventory valuation and valuation of the property plant and equipment instead of relying on the fair market value. This record will also be useful in revenue recognition.
|Inventory are the assets held for sale
Revaluation is carried out regularly.
Residual value is reviewed annually.
Depreciation is based on systematic basis over the asset’s useful life.
|For production of goods/rendering services.
Revaluation changes in equity
Revalue regularly to fair value
Depreciates in value
|For capital appreciation
to earn rentals
Keep at fair value
Fair value changes in profit and loss statement
There is depreciation in value
Glover, S. M., Taylor, M. H., & Wu, Y. J. (2016). Current practices and challenges in auditing fair value measurements and complex estimates: Implications for auditing standards and the academy. Auditing: A Journal of Practice & Theory, 36(1), 63-84.
Robin, A. S. B. (2016). Reconciliation and valuation of property, plant & equipment.