Bessrawl Corporation: Analyzing IFRS Impact on Financial Statements

This case study analyzes the financial statements of Bessrawl Corporation, a US-based company currently using US GAAP, and assesses the impact of adopting International Financial Reporting Standards (IFRS). The study focuses on reconciling the company's income and stockholders' equity by examining five key areas where US GAAP and IFRS differ: inventory valuation (IAS 2), property, plant, and equipment (historical cost and impairment), intangible assets (carrying value, fair value and expected future cash flows), research and development costs (expensing development phase), and sales-and-leaseback transactions. The assignment provides specific financial data for each area, including inventory costs, building values, and asset valuations, to facilitate the reconciliation process. The analysis involves determining the appropriate accounting treatments under IFRS, calculating the necessary adjustments to the financial statements, and understanding how these adjustments impact the reported income and equity. The solution references relevant IFRS standards and provides a detailed explanation of each adjustment, including the impact on the income statement and balance sheet, ensuring a comprehensive understanding of the financial implications of the switch to IFRS for Bessrawl Corporation. The case study is designed to provide practical application of IFRS principles and enhance understanding of the differences between US GAAP and IFRS.

Running head: INTERNATIONAL FINANCIAL REPORTING STANDARDS
International Financial Reporting Standards
Name of the Student:
Name of the University:
Author’s Note:

1INTERNATIONAL FINANCIAL REPORTING STANDARDS
Bessrawl Corporation
The Reconciliation of the financial statements will be done by the following the
underlying principles of the International Financial Reporting Standards. The adjustments will be
done on the basis of the accounting adjustments and principals laid down by the IFRS (Gordon &
Hsu, 2017).
Inventory: The recording of Inventory will be as per the IAS 2, which will provide the basis of
recording the inventory where the inventory will be measured at the cost value or at the net
realizable value from the same. The subsequent loss will be recorded at the OCI.
Plant and Machinery: The plant and machinery will be valued at the historical cost and the
impairment charges will be reported at the Other Comprehensive Income (O.C.I). The plant and
machinery will be reported at the carrying value and the relevant gain will be transferred to the
OCI account. The carrying value of the property will be around 2,783,000, the fair value of the
equipment was around 3,575,000, and the gain/loss will be reported under the Other
Comprehensive Income.
Intangible Assets: The intangible assets of the company are reported at the value of $44,000 in
the year 2014. The carrying value of the assets in the year was reported to have a fair value of
around 38,500 and the present value of the expected future cash flows was around 37,400. The
lower of the values will be reported in the balance sheet and the income loss derived will be
reported in the Income Statement.
Research and Development: The research and development expenses incurred by the company
will be fully recorded as a n expenses under the IAS 38 as the development of the product is not
certain and the feasibility and the expected future cash flow is not certain. Hence, the

2INTERNATIONAL FINANCIAL REPORTING STANDARDS
development phase expenses will be fully marked as a expenses under the income statement for
the year 2017.
Sales and Leaseback: The sales and leaseback gain will be reported in the OCI, the gain of
165,000 will be recognized, and the division of this equally will be reported in the income
statement. The amount will be recognized equally in the five years of income statement of the
company equally (Evans et al. 2014).

3INTERNATIONAL FINANCIAL REPORTING STANDARDS
Reference
Evans, M. E., Houston, R. W., Peters, M. F., & Pratt, J. H. (2014). Reporting regulatory
environments and earnings management: US and non-US firms using US GAAP or IFRS.
The Accounting Review, 90(5), 1969-1994.
Gordon, E. A., & Hsu, H. T. (2017). Tangible long-lived asset impairments and future operating
cash flows under US GAAP and IFRS. The Accounting Review, 93(1), 187-211.