Assignment Content
Client X operates in the US currently and is planning to expand operations globally next year. As a result, management is considering preparing financial statements in accordance with IFRS rather than with US GAAP.
Client X contacted you for clarification and recommendations regarding the following issues:
How the use of the LIFO method to value its inventories will be impacted if a switch to financial statements prepared in compliance with IFRS will be made.
Whether interest cost on construction of a new warehouse may be included in the cost of the new warehouse.
In what instances should goodwill be adjusted for impairment?
Provide a 150- word overview of each issue, followed by solid responses supported by research and proper citing.
Write a 350 word memo to Client X recommending the move to IFRS or the stay with GAAP, and why.
Format your paper consistent with APA guidelines.
GET SOLUTION BELOWAssignment status: Solved by our Writing Team at CapitalEssayWriting.com ORDER YOUR COPY AT CapitalEssayWriting.com
Memo Advising Client X on GAAP and IFRS
Name of Student
University Affiliation
Overview of GAAP and IFRS Accounting Principles
The accounting standards across countries have historically varied. However, the development of the International Financial Reporting Standards (IFRS) has created an accounting standard that would ease preparation of accounting reports by companies that invest in international markets. The United States companies that wish to invest in international markets must have a clear understanding of the IFRS and the major differences with the US Generally Accepted Accounting Principles (GAAP).
Although the major accounting and reporting requirements of inventories under GAAP and IFRS are similar, the use of Last In First Out (LIFO) is permitted only under the IFRS. In regards with interest capitalization, both GAAP and IFRS permit capitalization for assets that are self-constructed. However, GAAP permits only capitalization of avoidable interest, while under IFRS, the total amount borrowed for construction of an asset is capitalized. Both GAAP and IFRS view goodwill as assets that are identifiable if they can be separated on basis of legal or contractual rights. However, the GAAAP views goodwill as an intangible asset and is amortized on historical cost minus any impairment. In contrast, the IFRS revalues intangibles on basis of their values and crediting of any upward revision in the asset revaluation surplus account and adjusted for equity.
How the Use of the LIFO Method to Value Inventories Will Be Impacted
The accounting and reporting of inventories under the IFRS is principle-based compared to GAAP, which is based on detailed guidelines. Weygandt, Kimmel & Kieso (2018) points out that under the IFRS, the accounting and reporting for all goods of similar value follow similar cost flow assumption. The result is an impact on inventory assumptions that must be made when switching to IFRS. Whereas GAAP follows the LIFO, LIFO, and weighted average valuation, the IFRS employs FIFO and average-cost in making cost flow assumptions.
Whether Interest Cost On Construction of a New Warehouse May Be Included In the Cost of the New Warehouse Generally, the GAAP and IFRS principles are similar for accounting and reporting for plant, property, and equipment. In addition, the initial accounting for all costs for bringing an asset into the actual intended use and the depreciation methods are similar. However, the capitalization of interest under the GAAP occurs………………………………………………………………………………………………
ASSIGNMENT COMPLETED AT https://capitalessaywriting.com
