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Chapter 11 - Worldwide Accounting Diversity and International Standards
CHAPTER 11
WORLDWIDE ACCOUNTING DIVERSITY
AND INTERNATIONAL STANDARDS
Chapter Outline
I. Accounting and financial reporting rules differ across countries. There are a variety of factors
influencing a country’s accounting system.
A. Legal system—primarily relates to how accounting principles are established; code law
countries generally having legislated accounting principles and common law countries
having principles established by non-legislative means.
B. Taxation—financial statements serve as the basis for taxation in many countries. In
those countries with a close linkage between accounting and taxation, accounting practice
tends to be more conservative so as to reduce the amount of income subject to taxation.
C. Financing system—where shareholders are a major provider of financing, the demand for
information made available outside the company becomes greater. In those countries in
which family members, banks, and the government are the major providers of business
finance, there is less demand for public accountability and information disclosure.
D. Inflation—historically, caused some countries, especially in Latin America, to develop
accounting principles in which traditional historical cost accounting is abandoned in favor
of inflation adjusted figures. As inflation has been brought under control in most countries,
this factor is no longer of significant influence.
E. Political and economic ties—can explain the usage of a British style of accounting
throughout most of the former British Empire. They also help to explain similarities
between the U.S. and Canada, and increasingly, the U.S. and Mexico.
F. Culture—affects a country’s accounting system in two ways: (1) through its influence on a
country’s institutions, such as its legal system and system of financing, and (2) through its
influence on the accounting values shared by members of the accounting sub-culture.
II. Nobes developed a general model of the reasons for international differences in financial
reporting that has only two explanatory factors: (1) national culture, including institutional
structures, and (2) the nature of a country’s financing system.
A. A self-sufficient Type I culture will have a strong equity-outsider financing system which
results in a Class A accounting system oriented toward providing information for outside
shareholders.
B. A self-sufficient Type II culture will have a weak equity-outsider financing system which
results in a Class B accounting system oriented toward protecting creditors and providing
a basis for taxation.
C. Countries dominated by a country with a Type I culture will use a Class A accounting
system even though they do not have strong equity-outsider financing systems.
D. Companies with strong equity-outsider financing located in countries with a Class B
accounting system will voluntarily attempt to use a Class A accounting system to compete
in international capital markets.
III. Differences in accounting across countries cause several problems.

A. Consolidating foreign subsidiaries requires that the financial statements prepared in
accordance with foreign GAAP must be converted into the parent company’s GAAP.
B. Companies interested in obtaining capital in foreign countries often are required to provide
financial statements prepared in accordance with accounting rules in that country, which
are likely to differ from rules in the home country.
C. Investors interested in investing in foreign companies may have a difficult time in making
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Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
comparisons across potential investments because of differences in accounting rules

across countries.
IV. The International Accounting Standards Committee (IASC) was formed in 1973 in hopes of
improving and promoting the worldwide harmonization of accounting principles. It was
superseded by the International Accounting Standards Board (IASB) in 2001.
A. The IASC issued 41 International Accounting Standards (IAS) covering a broad range of
accounting issues. Ten IASs have been superseded or withdrawn, leaving 31 in effect.
B. The membership of the IASC was composed of over 140 accountancy bodies from more
than 100 nations.
C. The IASC was not in a position to enforce its standards. Instead, member accountancy
bodies pledged to work toward acceptance of IASs in the respective countries.
D. Because of criticism that too many options were allowed in its standards and therefore
true comparability was not being achieved, the IASC undertook a Comparability Project in
the 1990s, revising 10 of its standards to eliminate alternatives.
E. The IASC derived much of its legitimacy as an international standard setter through
endorsement of its activities by the International Organization of Securities Commissions.
IOSCO and the IASC agreed that, if the IASC could develop a set of core standards,
IOSCO would recommend that stock exchanges allow foreign companies to use IASs in
preparing financial statements. The IASC completed the set of core standards in 1998,
IOSCO endorsed their usage by foreign companies in 2000, and many members of
IOSCO adopted this recommendation.
V. The International Accounting Standards Board (IASB) replaced the IASC in 2001.
A. The IASB originally consisted of 14 members – 12 full-time and 2 part-time. The number
of board members was increased to 16 members in 2012, at least 13 of whom must be
full-time. Full-time IASB members are required to sever their relationships with former
employers to ensure independence. To ensure a broad international diversity, there
normally are four members from Europe; four from North America; four from the
Asia/Oceania region; one from Africa; one from South America; and two from any area to
achieve geographic balance.
B. IASB GAAP is referred to as International Financial Reporting Standards (IFRS) and
consists of (a) IASs issued by the IASC (and adopted by the IASB), (b) individual
International Financial Reporting Standards developed by the IASB, and (c)
Interpretations issued by the Standing Interpretations Committee (SIC) (until 2001) and
International Financial Reporting Interpretations Committee (IFRIC).
C. In addition to 31 IASs and 13 IFRSs (as of January 2013), the IASB also has a
Framework for the Preparation and Presentation of Financial Statements, which serves as
a guide to determine the proper accounting in those areas not covered by IFRS.
D. As of June 2012, more than 90 countries required the use of IFRS by all domestic publicly
traded companies, and several important countries were to begin using IFRS in the near
future. Other countries allow the use of IFRS by domestic companies. Many countries
also allow foreign companies that are listed on their securities markets to use IFRS.
E. There are two primary methods used by countries to incorporate IFRS into their financial
reporting requirements for listed companies: (1) full adoption of IFRS as issued by the
IASB, without any intervening review or approval by a local body, and (2) adoption of
IFRS after some form of national or multinational review and approval process.
VI. The U.S. FASB has adopted a strategy of convergence with IASB standards.
A. In 2002, the IASB and FASB signed the so-called “Norwalk Agreement” to “use their best
efforts to (a) make their existing financial reporting standards fully compatible as soon as
is practicable and (b) coordinate their work program to ensure that once achieved,
compatibility is maintained.”
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Education.
B. The FASB-IASB convergence process has resulted in changes made to U.S. GAAP,
IFRS, or both in a number of areas including: Business combinations, Non-controlling
interests, Acquired in-process research costs, Share-based payment, Borrowing costs,
Segment reporting, and Presentation of other comprehensive income.
C. At the beginning of 2013, the FASB listed joint convergence projects with either an
Exposure Draft or final standard expected to be issued in 2013 in the following areas:
Leases, Insurance contracts, Financial instruments, Revenue recognition, Investment
companies, and Consolidation: Policy and Procedures
VII. The U.S. SEC’s early interest in IFRS stemmed from IOSCO’s endorsement of IFRS for cross-
listing purposes.
A. After considering this issue for several years, in 2007 the SEC amended its rules to allow
foreign registrants to prepare financial statements in accordance with IFRS without
reconciliation to U.S. GAAP. Since 2007, foreign companies using IFRS have been able
to list securities on U.S. securities markets without providing any U.S. GAAP information
in their annual reports.
B. To level the playing field for U.S. companies, in July 2007, the SEC issued a concept
release to determine public interest in allowing U.S. companies to choose between IFRS
and U.S. GAAP in preparing financial statements. Many comment letter writers were not
in favor of allowing U.S. companies to choose between IFRS and U.S. GAAP instead
recommending that U.S. companies be required to use IFRS.
C. In November 2008, the SEC issued the so-called “IFRS Roadmap.” The SEC
indicated it would monitor several milestones until 2011 at which time it decide whether
to require U.S. companies to follow IFRS over a three-year phase-in period. The
Roadmap indicated 2014 as the first year of IFRS adoption, but a subsequent SEC
Release in February 2010 pushed that date back to “approximately 2015 or 2016.”
D. In 2011, the SEC Staff published a discussion paper that suggests an alternative
framework for incorporating IFRS into the U.S. financial reporting system. This
framework combines the existing FASB-IASB convergence project with the
endorsement process followed in many countries and the EU. Some refer to this
method as “condorsement.” The framework would retain both U.S. GAAP and the
FASB as the U.S. accounting standard setter. At the end of a transition period, a U.S.
company following U.S. GAAP also would be able to represent that its financial
statements are in compliance with IFRS.
E. The 2011 deadline established by the SEC in its IFRS Roadmap came and went
without the Commission making a decision whether to require the use of IFRS in the
U.S. In July 2012, the SEC staff issued a Final Staff Report that summarized analysis
conducted by the SEC Staff on the possible use of IFRS by U.S. companies, but it did
not include conclusions or recommendation for action by the Commission and did not
provide insight into the nature or timetable for next steps. Thus, at the time this book
went to press, the SEC had not signaled when it might make a decision about whether
and, if so, how IFRS should be incorporated into the U.S. financial reporting system.
VIII. IFRS 1, First-time Adoption of IFRS, established guidelines that a company must use in
transitioning from previously-used GAAP to IFRS.
A. Companies transitioning to IFRS must prepare an opening balance sheet at the “date of
transition.” The transition date is the beginning of the earliest period for which an entity
presents full comparative information under IFRS. For example, for a company preparing
its first set of financial statements for the calendar year 2017, the date of transition is
January 1, 2015.
B. An entity must complete the following steps to prepare the opening IFRS balance sheet:
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Education.
1. Determine applicable IFRS accounting policies based on standards in force on the

reporting date.
2. Recognize assets and liabilities required to be recognized under IFRS that were
not recognized under previous GAAP and derecognize assets and liabilities
previously recognized that are not allowed to be recognized under IFRS.
3. Measure assets and liabilities recognized on the opening balance sheet in
accordance with IFRS.
4. Reclassify items previously classified in a different manner from what is acceptable
under IFRS.
IX. IAS 8, “Accounting Policies, Changes in Accounting Estimates and Errors,” establishes
guidelines for determining appropriate IFRS accounting polices.
A. Companies must use the following hierarchy to determine accounting polices that will
be used in preparing IFRS financial statements.
1. Apply specifically relevant standards (IASs, IFRSs, or Interpretations) dealing with
an accounting issue.
2. Refer to other IASB standards dealing with similar or related issues.
3. Refer to the definitions, recognition criteria, and measurement concepts in the
IASB Framework.
4. Consider the most recent pronouncements of other standard-setting bodies that
use a similar conceptual framework, other accounting literature, and accepted
industry practice to the extent that these do not conflict with sources in 2. and 3.
above.
B. Because the FASB and IASB conceptual frameworks are similar, step 4 provides an
opportunity for entities to adopt FASB standards in dealing with accounting issues
where steps 1 through 3 are not helpful.
X. Numerous differences exist between IFRS and U.S. GAAP.

A. Differences exist with respect to recognition, measurement, presentation, and disclosure.
Exhibit 11.8 lists several key differences.
B. IAS 1, “Presentation of Financial Statements,” provides guidance with respect to the
purpose of financial statements, components of financial statements, basic principles and
assumptions, and the overriding principle of fair presentation. There is no equivalent to
IAS 1 in U.S. GAAP.
C. The IASB follows a principles-based approach to standard setting, rather than the so-
called rules-based approach used by the FASB. The IASB tends to avoid the use of
bright line tests and provides a limited amount of implementation guidance in its
standards.
XI. Even if all countries adopt a similar set of accounting standards, two obstacles remain in
achieving the goal of worldwide comparability of financial statements.
A. IFRS must be translated into languages other than English to be usable by non-English
speaking preparers of financial statements. It is difficult to translate some words and
phrases into other languages without a distortion of meaning.
B. Culture can affect the manner in which an accountant interprets and applies an
accounting standard. Differences in culture can lead to differences in application of the
same standard across countries.
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Education.
Answer to Discussion Question: Which Accounting Method Really is Appropriate?

Students in the United States often assume that U.S. GAAP is superior and that all reporting issues
can (or should) be resolved by following U.S. rules. However, the reporting of research and
development costs is a good example of a rule where different approaches can be justified and the
U.S. rule might be nothing more than an easy method to apply. In the United States, all such costs
are expensed as incurred because of the difficulty of assessing the future value of these projects.
International Financial Reporting Standards require capitalization of development costs when
certain criteria are met.
The issue is not whether costs that will have future benefits should be capitalized. Most
accountants around the world would recommend capitalizing a cost that leads to future revenues
that are in excess of that cost. The real issue is whether criteria can be developed for identifying
projects that will lead to the recovery of those costs. In the U.S., the FASB felt that such decisions
were too subjective and open to manipulation.
Conversely, under IFRS, development costs must be recognized as an intangible asset when an
enterprise can demonstrate all of the following:
(a) the technical feasibility of completing the intangible asset so that it will be available for use or
sale;
(b) its intention to complete the intangible asset and use or sell it;
(c) its ability to use or sell the intangible asset;
(d) how the intangible asset will generate probable future economic benefits. Among other things,
the enterprise should demonstrate the existence of a market for the output of the intangible
asset or the existence of the intangible asset itself or, if it is to be used internally, the usefulness
of the intangible asset;
(e) the availability of adequate technical, financial and other resources to complete the
development and to use or sell the intangible asset; and
(f) its ability to measure the expenditure attributable to the intangible asset during its development
reliably.
The IFRS treatment of development costs begs the question: How easy is it for an accountant to
determine whether the development project will result in an intangible asset, such as a patent, that
will generate future economic benefits?
In the U.S., a conservative approach has been taken because of the difficulty of determining
whether an asset has been or will be created. To ensure comparability, all companies are required
to expense all R&D costs. As a result, costs related to development costs that prove to be very
valuable to a company for years to come are expensed immediately. Do the benefits of consistency
and comparability (each company expenses all costs each year) outweigh the cost of producing
financial statements that might omit valuable assets from the balance sheet? No definitive answer
exists for that question. However, the reader of financial statements needs to be aware of the
fundamental differences in approach that exist in accounting for development costs before making
comparisons between companies from different countries.
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Education.
Answers to Questions
1. The five factors most often cited as affecting a country's accounting system are: (1) legal
system, (2) taxation, (3) providers of financing, (4) inflation, and (5) political and economic ties.
The legal system is primarily related to how accounting principles are established; code law
countries generally having legislated accounting principles and common law countries having
principles established by non-legislative means. In some countries, financial statements serve
as the basis for taxation and in other countries they do not. In those countries with a close
linkage between accounting and taxation, accounting practice tends to be more conservative
so as to reduce the amount of income subject to taxation. Shareholders are a major provider
of financing in some countries. As shareholder financing increases in importance, the demand
for information made available outside the company becomes greater. In those countries in
which family members, banks, and the government are the major providers of business
finance, there tends to be less demand for public accountability and information disclosure.
Historically, chronic high inflation caused some countries, especially in Latin America, to
develop accounting principles in which traditional historical cost accounting is abandoned in
favor of inflation adjusted figures. Because inflation has been brought under control in most
countries of the world, this factor is no longer of much significance. Political and economic ties
can explain the usage of a British style of accounting throughout most of the former British
empire. They also help to explain similarities between the U.S. and Canada, and increasingly,
the U.S. and Mexico.
Culture also is viewed as a factor that has significant influence on the development of a
country’s accounting system. This influence is described in more detail in the answer to
question 3.
2. Problems caused by accounting diversity for a company like Nestle include: (a) the additional
cost associated with converting foreign GAAP financial statements of foreign subsidiaries to
parent company GAAP to prepare consolidated financial statements, (b) the additional cost
associated with preparing Nestle financial statements in foreign GAAP (or reconciling to foreign
GAAP) to gain access to foreign capital markets, and (c) difficulty in understanding and
comparing financial statements of potential foreign acquisition targets.
3. Gray developed a model that hypothesizes that societal values, i.e., culture, affect the
development of accounting systems in two ways: (1) societal values help shape a country’s
institutions, such as legal system and financing system, which in turn influences the
development of accounting, and (2) societal values influence accounting values held by
members of the accounting sub-culture, which in turn influences the development of the
accounting system. Gray provides specific hypotheses with respect to the manner in which
specific cultural dimensions will influence specific accounting values. For example, he
hypothesizes that in countries in which avoiding uncertainty is important, accountants will have
a preference for more conservative measurement of profit.
4. According to Nobes, the purpose for financial reporting determines the nature of a country’s
financial reporting system. The most relevant factor for determining the purpose of financial
reporting is the nature of the financing system. Some countries have a culture, and
accompanying institutional structure, that leads to a strong equity financing system with large
numbers of outside shareholders.
A country with a self-sufficient Type I culture will have a strong equity-outsider financing
system which in turn will lead that country developing a Class A accounting system oriented
toward providing information for outside shareholders. A self-sufficient Type II culture will have
a weak equity-outsider financing system which results in a Class B accounting system oriented
toward protecting creditors and providing a basis for taxation.
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Education.
5. Several of the IASC’s original standards were criticized for allowing too many alternative
methods of accounting for a particular item. As a result, through the selection of different
acceptable options, the financial statements of two companies following International
Accounting Standards still might not have been comparable. To enhance the comparability of
financial statements prepared in accordance with International Accounting Standards, and at
the urging of the International Organization of Securities Commissions, the IASC systematically
reviewed its existing standards (in the so-called Comparability Project) and revised ten of them
by eliminating previously acceptable alternatives.
6. A major difference between the IASB and the IASC is the composition of the Board and the
manner in which Board members are selected. IASB has at least 12 and as many as 14 full-
time members, the IASC had zero. Full-time IASB members must sever their employment
relationships with former employers and must maintain their independence. Seven of the full-
time members have a liaison relationship with a national standard setter. At least five
members must have been auditors, three must have been financial statement preparers, three
must have been users of financial statements, and at least one must come from academia.
The most important criterion for appointment to the IASB is technical competence. (Although
not stated in the body of the chapter, there was a perception that some appointments to the
IASC were based on politic connections and not competence.)
[Some of the common features of the IASC and IASB are that both (a) issue/d “international
standards,” (b) have/had their headquarters in London, and (c) use/d English as the working
language.]
7. This statement is true in that EU publicly traded companies are required to use IFRS in
preparing consolidated financial statements. It is false in that non-public companies are not
required to use IFRS and publicly traded companies do not use IFRS in preparing their parent
company only financial statements.
8. The bottom section of Exhibit 11.6 shows the countries as of June 2012 that do not allow
domestic companies to use IFRS in preparing consolidated financial statements. The two most
economically important countries in this group are China and the United States.
9. The IASB and FASB have agreed to “use their best efforts to (a) make their existing financial
reporting standards fully compatible as soon as is practicable and (b) coordinate their work
program to ensure that once achieved, compatibility is maintained.”
10. Convergence implies a joint effort between two standard setters to reduce differences in the
sets of standards for which they are responsible. Convergence could result in one standard
setter adopting an existing standard developed by the other standard setter or by the two
standard setters jointly developing a new standard. Convergence does not necessarily mean
the two sets of standards that result from the convergence process will be the same. Indeed,
the FASB and IASB acknowledge that differences between IFRS and U.S. GAAP will continue
to exist even after convergence.
In contrast to the approach taken by the FASB to influence future IASB standards, the
European Union simply adopted IFRS as the national GAAP in member nations.
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Education.
11. Since 2007, foreign companies listed on U.S. stock exchanges may file IFRS financial
statements with the U.S. SEC without providing any reconciliation to U.S. GAAP. Domestic
companies listed on U.S. stock exchanges must file financial statements prepared in
accordance with U.S. GAAP.
The SEC’s proposed condorsement framework combines the FASB–IASB convergence
process with the IFRS endorsement process followed in many countries and in the EU. The
framework would retain both U.S. GAAP and the FASB as the U.S. accounting standard
setter. At the end of a transition period, a U.S. company following U.S. GAAP also would be
able to represent that its financial statements are in compliance with IFRS. The two
components of the framework are:
• The FASB continues to participate in the process of developing new IFRSs and
incorporates those standards into U.S. GAAP by means of an endorsement process.
• The FASB would incorporate existing IFRSs into U.S. GAAP over a defined period of time,
for example, five to seven years, with a focus on minimizing transition costs for U.S.
companies.
At the time this book went to press in the third quarter of 2013, the SEC still had not yet made
a decision on the issue of incorporating IFRS into the U.S. financial reporting system.
12. When adopting IFRS, a company must prepare an “IFRS opening balance sheet” at the
date of transition. The date of transition is the beginning of the earliest period for which
comparative information must be presented, i.e., two years prior to the “reporting date.” A
company must follow five steps in preparing its IFRS opening balance sheet:
1. Determine applicable IFRS accounting policies based on standards that will be in force
on the reporting date.
2. Recognize assets and liabilities required to be recognized under IFRS that were not
recognized under prior GAAP, and derecognize assets and liabilities recognized under
prior GAAP that are not allowed to be recognized under IFRS.
3. Measure assets and liabilities recognized on the IFRS opening balance sheet in
accordance with IFRS (that will be in force on the reporting date).
4. Reclassify items previously classified in a different manner from what is acceptable
under IFRS.
5. Comply with all disclosure and presentation requirements.
13. The extreme approaches that a company might follow in determining appropriate
accounting policies for preparing its initial set of IFRS financial statements are:
1. Adopt accounting policies acceptable under IFRS that minimize change from existing
accounting policies used under current GAAP.
2. Take a fresh start, clean slate approach and develop accounting policies acceptable
under IFRS that will result in financial statements that reflect the economic substance of
transactions and present the most economically meaningful information possible.
14. According to the accounting policy hierarchy in IAS 8, if a company is faced with an
accounting issue for which (a) there is no specific IASB standard that applies, (b) there are
no IASB standards on related issues, and (c) reference to the IASB’s Framework does not
help in determining an appropriate accounting treatment, then the company should
consider the most recent pronouncements of other standard-setting bodies that use a
similar conceptual framework. The FASB’s conceptual framework is similar to the IASB’s,
so reference to FASB pronouncements would be acceptable under IAS 8 when conditions
(a), (b), and (c) exist.
11-8
Education.
15. Potentially significant differences between IFRS and U.S. GAAP related to asset recognition
and measurement are:
• Acceptable use of LIFO under U.S. GAAP, but not IFRS.
• Definition of “market” in the lower of cost or market rule for inventory – replacement cost
under U.S. GAAP; net realizable value under IFRS.
• Reversal of inventory writedowns allowed under IFRS, but not under U.S. GAAP.
• Possible revaluation of property, plant, and equipment under IFRS (allowed alternative), but
not under U.S. GAAP.
• Capitalization of development costs as an intangible asset under IFRS, which is not
acceptable under U.S. GAAP (except for computer software development costs).
• Difference in the determination of whether an asset is impaired.
• Subsequent reversal of impairment losses allowed by IFRS, but not U.S. GAAP.
16. Even if all countries adopt a similar set of accounting standards, two obstacles remain in
achieving the goal of worldwide comparability of financial statements. First, IFRS must be
translated into languages other than English to be usable by non-English speaking preparers
of financial statements. It is difficult to translate some words and phrases found in IFRS into
non-English languages without a distortion of meaning. Second, culture can affect the manner
in which accountants interpret and apply accounting standards. Differences in culture can lead
to differences in how the same standard is applied across countries.
11-9
Education.
Answers to Problems
1. B
2. C
3. D
4. C
5. D
6. D
7. D
8. A
9. A
10. C
11. B
12. D
13. A
14. C
11-10
Education.
Problems 15-19 are based on the comprehensive illustration.
15. (15 minutes) (Carrying inventory at the lower of cost or “market”)
Historical cost $120,000

Replacement cost $111,900
Net realizable value $117,000
Normal profit margin 20%
Net realizable value less normal profit [$117,000 – (20% x$117,000)] $93,600
a. 1. Under U.S. GAAP, the company reports inventory on the balance sheet at the
lower of historical cost or market, where market is defined as replacement cost
(with net realizable value as a ceiling and net realizable value less a normal
profit as a floor). In this case, inventory will be written down to replacement cost
and reported on the December 31, 2015 balance sheet at $111,900. A $8,100
loss will be included in 2015 income.
2. In accordance with IAS 2, the company reports inventory on the balance sheet at
the lower of historical cost and net realizable value. As a result, inventory will be
reported on the December 31, 2015 balance sheet at its net realizable value of
$117,000 and a loss on writedown of inventory of $3,000 will be reflected in 2015
net income.
b. As a result of the differing amounts of inventory loss recognized under U.S. GAAP
and IFRS, Lisali will add $5,100 to U.S. GAAP income to reconcile to IFRS income,
and will add $5,100 to U.S. GAAP stockholders’ equity to reconcile to IFRS
stockholders’ equity.
11-11
Education.
16. (25 minutes) (Measurement of property, plant, and equipment subsequent to

acquisition)
Cost $78,400
Residual value $10,000
Useful life 6 years
Straight-line depreciation $11,400 per year
a. 1. Under U.S. GAAP, the company would report the equipment at its depreciated
historical cost. Straight-line depreciation expense is $11,400 per year. The
equipment would be reported at $67,000, $55,600, and $44,200, respectively, on
the December 31, 2015, 2016, and 2017 balance sheets.
2. Under IFRS, the equipment would be depreciated by $11,400 in 2015, resulting

in a book value of $67,000 at December 31, 2015. Under IAS 16’s allowed
alternative treatment, the equipment would be revalued on January 1, 2016 to its
fair value of $74,500.
The journal entry to record the revaluation on January 1, 2016 would be:
Dr. Equipment $7,500
Cr. Revaluation Surplus (stockholders’ equity) $7,500
(To revalue equipment from carrying value of $67,000
to appraisal value of $74,500.)
Depreciation expense on a straight-line basis in 2016, 2017, and beyond would

be $12,900 per year [($74,500 – $10,000) / 5 years]. The equipment would be
reported on the December 31, 2016 balance sheet at $61,600 [$74,500 –
$12,900], and on the December 31, 2017 balance sheet at $48,700 [$61,600 –
$12,900].
The differences can be summarized as follows:
Depreciation expense 2015 2016 2017

IFRS $11,400 $12,900 $12,900
U.S. GAAP $11,400 $11,400 $11,400
Difference $0 $1,500 $1,500
Book value of equipment 12/31/15 12/31/16 12/31/17

IFRS $67,000 $61,600 $48,700
U.S. GAAP $67,000 $55,600 $44,200
Difference $0 $ 6,000 $ 4,500
11-12
Education.
16. (continued)
b. There is no difference in net income between IFRS and U.S. GAAP in 2015, so
no reconciliation adjustments are necessary in 2015.
In 2016, the additional amount of depreciation expense of $1,500 related to the

revaluation surplus under IFRS must be subtracted from U.S. GAAP income to
reconcile to IFRS net income. The additional depreciation taken under IFRS causes
IFRS retained earnings to be $1,500 less than U.S. GAAP retained earnings at
December 31, 2016. Under IFRS, the revaluation surplus causes IFRS
stockholders’ equity to be $7,500 larger than U.S. GAAP stockholders’ equity. The
adjustment to reconcile U.S. GAAP stockholders’ equity to IFRS is $6,000, the
difference between the original amount of the revaluation surplus ($7,500) and the
accumulated depreciation on that surplus ($1,500). $6,000 would be added to U.S.
GAAP stockholders’ equity to reconcile to IFRS.
In 2017, $1,500 again is added to IFRS net income to reconcile to U.S. GAAP net
income, and $4,500 is subtracted from IFRS stockholders’ equity to reconcile to U.S.
GAAP stockholders’ equity. $4,500 is the amount of revaluation surplus ($7,500)
less accumulated depreciation on that surplus for two years ($3,000).
17. (15 minutes) (Research and development costs)
Research and development costs $650,000 (30% related to development)

Useful life 10 years
a. 1. Under U.S. GAAP, $650,000 of research and development costs would be

expensed in 2015.
2. In accordance with IAS 38, $455,000 [$650,000 x 70%] of research and

development costs would be expensed in 2015, and $195,000 [$650,000 x 30%]
of development costs would be capitalized as an intangible asset. The intangible
asset would be amortized over its useful life of ten years, but only beginning in
2016 when the newly developed product is brought to market.
b. In 2015, $195,000 would be added to U.S. GAAP net income to reconcile to IFRS
and the same amount would be added to U.S. GAAP stockholders’ equity.
In 2016, the company would recognize $19,500 [$195,000 / 10 years] of

amortization expense on the deferred development costs under IFRS that would not
be recognized under U.S. GAAP. In 2016, $19,500 would be subtracted from U.S.
GAAP net income to reconcile to IFRS net income. The net adjustment to reconcile
from U.S. GAAP stockholders equity to IFRS at December 31, 2016 would be
$175,500, the sum of the $195,000 smaller expense under IFRS in 2015 and the
$19,500 larger expense under IFRS in 2016. $175,500 would be added to U.S.
GAAP stockholders’ equity at December 31, 2016 to reconcile to IFRS.
11-13
Education.
18. (15 minutes) (Gain on sale and leaseback transaction)
Gain on sale of asset $76,000

Life of leaseback 4 years
a. 1. Under U.S. GAAP, the gain of $76,000 on the sale and leaseback transaction is
deferred and amortized to income over the life of the lease. With a lease period
of four years, $19,000 [$76,000 / 4 years] of the gain would be recognized in
2015.
2. In accordance with IAS 17, the entire gain of $76,000 on the sale and leaseback
would be recognized in income in the year of the sale when the lease is an
operating lease.
b. In 2015, IFRS net income exceeds U.S. GAAP net income by $57,000, the
difference ($76,000 vs. $19,000) in the amount of gain recognized on the sale and
leaseback transaction. A positive adjustment of $57,000 would be made to
reconcile U.S. GAAP net income and U.S. GAAP stockholders’ equity to IFRS.
In 2016, a gain of $19,000 would be recognized under U.S. GAAP that would not
exist under IFRS. As a result, $19,000 would be subtracted from U.S. GAAP net
income to reconcile to IFRS. By December 31, 2016, $38,000 of the gain would
have been recognized under U.S. GAAP and included in retained earnings, whereas
retained earnings under IFRS includes the entire $76,000 gain. Thus, $38,000
would be added to U.S. GAAP stockholders’ equity at 12/31/16 to reconcile to IFRS.
11-14
Education.
19. (20 minutes) (Impairment of property, plant, and equipment)
Cost of equipment $135,000

Salvage value zero
Useful life 5 years
Depreciation expense, 2015 $27,000
Carrying value, 12/31/15 $108,000
Expected future cash flows, 12/31/15 116,000
PV of expected future cash flows, 12/31/15 100,000
Fair value (net selling price) less costs to dispose, 12/31/15 96,600
a. 1. Under U.S. GAAP, an asset is impaired when its carrying value exceeds the
expected future cash flows (undiscounted) to be derived from use of the asset.
Expected future cash flows are $116,000, which exceeds the carrying value of
$108,000, so the asset is not impaired. Depreciation expense for the year is
$27,000 [$135,000 / 5 years], and the equipment will be carried on the
December 31, 2015 balance sheet at $108,000.
2. In accordance with IAS 36, an asset is impaired when its carrying value exceeds
its recoverable amount, which is the greater of (a) value in use (present value of
expected future cash flows), and (b) net selling price, less costs to dispose. The
carrying value of the equipment at December 31, 2015 is $108,000; original cost
of $135,000 less accumulated depreciation of $27,000 [$135,000 / 5 years]. The
asset’s recoverable amount is $100,000 (the higher of value in use of $100,000
and fair value of $96,600), so the asset is impaired. An impairment loss of
$8,000 [$108,000 - $100,000] would be recognized at the end of 2015, in
addition to depreciation expense for the year of $27,000. The equipment will be
carried on the December 31, 2015 balance sheet at $100,000.
b. An impairment loss of $8,000 was recognized in 2015 under IFRS but not under
U.S. GAAP. Therefore, $8,000 must be subtracted from U.S. GAAP net income to
reconcile to IFRS net income in 2015. The same amount would be subtracted from
U.S. GAAP stockholders’ equity at December 31, 2015 to reconcile to IFRS
In 2016, depreciation under IFRS will be $25,000 [$100,000 / 4 years], whereas

depreciation under U.S. GAAP is $27,000. $2,000 would be added to U.S. GAAP
net income to reconcile to IFRS net income in 2016. To reconcile stockholders’
equity to IFRS at December 31, 2016, $6,000 must be subtracted from U.S. GAAP
stockholders’ equity. This is the difference between the impairment loss of $8,000 in
2015 taken under IFRS and the difference in depreciation expense recognized
under the two sets of standards in 2016. It also is equal to the difference in the
carrying value of the equipment at December 31, 2016 under the two sets of
accounting rules:
IFRS U.S. GAAP

Cost $135,000 $135,000
Depreciation, 2015 (27,000) (27,000)
Impairment loss, 2015 (8,000) 0
Carrying value, 12/31/15 $100,000 $108,000
Depreciation, 2016 (25,000) (27,000)
Carrying value, 12/31/16 $75,000 $81,000
11-15
Education.
Chapter 11 Develop Your Skills
Analysis Case 1—Application of IAS 16
This assignment demonstrates the effect one difference between IFRS and U.S. GAAP
would have on a company's net income and stockholders' equity over a 20-year period.
Depreciation expense in Years 1 and 2 under both sets of rules: $10,000,000 / 20

years = $500,000 per year
The building has a book value of $9,000,000 on January 1, Year 3. On that date, under
IFRS, Abacab would revalue the building through the following journal entry:
Dr. Building $3,000,000

Cr. Accumulated Other Comprehensive Income (AOCI) $3,000,000
Under IFRS, the revalued amount of the building will be depreciated over the
remaining useful life of 18 years at the rate of $666,667 per year [$12,000,000 / 18
years].
a. Depreciation Expense Year 2 Year 3 Year 4

IFRS $500,000 $666,667 $666,667
U.S. GAAP $500,000 $500,000 $500,000
b. Book Value of Building 1/2/Y3 12/31/Y3 12/31/Y4

IFRS $12,000,000 $11,333,333 $10,666,666
U.S. GAAP $9,000,000 $8,500,000 $8,000,000
Difference $3,000,000 $2,833,333 $2,666,666
c. Pre-tax income will be $166,667 smaller in each year (Year 3 -Year 20) under
IFRS. Cumulatively, IFRS-pretax income will be $3,000,000 smaller than U.S.
GAAP pretax income over this 18-year period. Stockholders' equity will be
$3,000,000 greater under IFRS at January 1, Year 3. This difference will decrease
by $166,667 each year (due to greater IFRS depreciation expense), such that
stockholders' equity will be the same under both sets of rules at December 31,
Year 20. The difference in stockholders' equity each year is equal to the difference
in the book value of the building.
11-16
Education.
Analysis Case 2— Reconciliation of IFRS to U.S. GAAP
Quantacc Ltd.
Schedule to Reconcile IFRS Net Income and Stockholders’ Equity
to U.S. GAAP
2015
Income under IFRS $ 100,000
Adjustments:
Add depreciation on revaluation amount in current year under IFRS 3,500
Add gain on sale and leaseback recognized in current year under U.S. GAAP 10,000
Add current year’s amortization of deferred development costs 16,000
Income under U.S. GAAP $ 129,500
12/31/2015
Stockholders’ equity under IFRS $ 1,000,000
Adjustments:
Subtract revaluation surplus (35,000)
Add accumulated depreciation on revaluation amount under IFRS (2015 only) 3,500
Subtract total amount of gain on sale and leaseback recognized under IFRS in
2014 (200,000)
Add cumulative amount of gain on sale and leaseback that would have been
recognized under U.S. GAAP in 2014 and 2015 20,000
Subtract total amount of development costs capitalized under IFRS in 2014 (80,000)
Add cumulative amount of amortization expense on development costs
recognized under IFRS (2015 only) 16,000
Stockholders’ equity under U.S. GAAP $ 724,500
Explanation for adjustments:
1. Under IFRS – Quantacc recorded a Revaluation Surplus (stock equity account) of

$35,000 on 1/1/2015. In 2015, $3,500 of depreciation expense was taken on the
revaluation amount ($35,000 / 10 years).
Under U.S. GAAP – neither of these would have been recognized.

To reconcile from IFRS to GAAP – add $3,500 to IFRS 2015 net income; subtract a
total of $31,500 from IFRS 12/31/2015 stockholders’ equity (subtract $35,000
Revaluation Surplus and add $3,500 of accumulated depreciation on the revaluation
amount).
11-17
Education.
2. Under IFRS – Quantacc recognized a gain on sale/leaseback of $200,000 in 2014.

No gain was recognized in 2015.
Under GAAP – Quantacc would recognize a gain on sale/leaseback of $10,000 in

both 2014 and 2015.
To reconcile from IFRS to GAAP – add $10,000 to IFRS 2015 net income.
At the end of 2015, the increase in retained earnings related to the gain on
sale/leaseback under IFRS is $200,000, but would only be $20,000 under GAAP.
To reconcile from IFRS to GAAP – subtract a total of $180,000 from IFRS

12/31/2015 stockholders’ equity.
3. Under IFRS – Quantacc recognized a development cost asset of $80,000 in 2014.

In 2015, amortization expense related to this asset was $16,000 ($80,000 / 5 years).
Under GAAP – Quantacc would have expensed development costs of $80,000 in

2014.
In 2015, there is $16,000 more expense under IFRS than under GAAP. To reconcile
from IFRS to GAAP – add $16,000 to IFRS 2015 net income. At 12/31/2015, the
decrease in retained earnings is $64,000 larger under IFRS than under GAAP. To
reconcile from IFRS to GAAP, subtract a total of $64,000 from IFRS 12/31/2015
Research Case—Reconciliation to U.S. GAAP
Note to instructors: The SEC no longer requires a U.S. GAAP reconciliation from
foreign companies using IFRS. As more foreign companies adopt IFRS over
time, it will become increasingly more difficult for students to find foreign
companies that provide a U.S. GAAP reconciliation in their Form 20-F. Exhibit
11.6 can help in identifying countries not using IFRS.
In addition, students may find EDGAR to be of limited use in accessing foreign

company annual reports because few foreign companies file electronically with
the SEC. Instructors might want to emphasize to their students that they might
have more luck accessing the annual report of their selected company from the
company's website.
This assignment requires students to find the note in Form 20-F in which foreign
companies reconcile net income and stockholders' equity from foreign GAAP to U.S.
GAAP. The responses to this assignment will depend upon the company selected by
the student to research. Examining the reconciliation from foreign GAAP to U.S. GAAP
in Form 20-F is a good way to learn some of the major differences between foreign and
U.S. GAAP. Students may be surprised to learn how few adjustments most foreign
companies make in reconciling to U.S. GAAP.
11-18
Education.
Communication Case—Voluntary Adoption of IFRS
The response to the requirement in this case will vary by student. Potential benefits and
potential risks from the voluntary adoption of IFRS that students might discuss in their
memo include the following:
• Potential benefits.
Preparing IFRS financial statements would make it easier for analysts to compare
the company with foreign competitors that use IFRS. This could result in a lower cost
of capital for the company. It also would make it easier for the company to
benchmark against foreign competitors.
For multinational companies with subsidiaries primarily using IFRS as their local
GAAP, the use of IFRS would allow the parent company to avoid IFRS to U.S.
GAAP conversions in preparing consolidated financial statements.
• Potential risks.
The major risk of voluntary adoption of IFRS is that the SEC might ultimately decide
not to require the use of IFRS in the United States. In that case, the company would
probably be required to switch back to U.S. GAAP. The company would have
incurred substantial costs in changing its systems to IFRS, without being able to
reap the potential benefits over a long period of time, and it would have to incur the
cost of switching back to U.S. GAAP.
Internet Case—Foreign Company Annual Report
The responses to this assignment will depend on the company selected by the student.
A comparison of the findings across companies selected by students can lead to a
lively classroom discussion.
The instructor might wish to complete this assignment for a non-U S. company of
his/her choice to lead the discussion.
11-19
Education.
Another random document with
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“Well, I’m glad you’ve got here. We’ve been having a picnic up at
the house. Julie’s been having the hysterics and MacDonald—you
never knew MacDonald, did you?”
Applegate listened politely. He had a curious feeling that Julie and
her hysterics were already very far away and unimportant to him, but
he did not wish to be so brutal as to show this.
“When did MacDonald return and where has he been?” he asked,
gravely.
“He got here yesterday. He says he had a shock or something in
that accident—anyhow, he just couldn’t remember anything, and
when he come to he didn’t know who he was, nor anything about
himself, and all his papers and clothes had been burnt, so there was
nothing to show anybody who he was. He could work, and he was all
right most ways. Says he was that way till about six months ago,
when a Frisco doctor got hold of him and did something to his head
that put him right. He has papers from the doctor to show it’s true.
His case attracted lots of attention out there. Of course he wrote to
Julie when he came to himself, but his letters went to our old
address and she never got them. So then he started East to see
about it. He says he’s got into a good business and is going to do
well.”
There was a long silence. Presently Hopson began again,
awkwardly:
“I don’t know how you feel about it, but I think Julie’d ought to go
back to him.”
Applegate’s heart began to beat in curious, irregular throbs; he
could feel the pulsing of the arteries in his neck and there was a
singing in his ears.
“Of course Julie agrees with you?” he said, thickly.
“Well, no; she don’t. That’s what she wanted me to talk to you
about. She can’t see it but one way. She says he died, or if he didn’t
it was the same thing to her, and she married you. She says nobody
can have two husbands, and it’s you who are hers. I told her the law
didn’t look at it that way, and she says then she must get a divorce
from MacDonald and remarry you. MacDonald says if she brings suit
on the ground of desertion he will fight it. He says he can prove it
ain’t been no wilful desertion. But probably he could be brought
round if he saw she wouldn’t go back to him anyhow. MacDonald
wouldn’t be spiteful. But he was pretty fond of Julie.”
Applegate had stopped suddenly in the middle of Hopson’s
speech. Now he went forward rapidly, but he made no answer.
Hopson scrutinized his face a moment before he continued:
“Julie says you won’t be spiteful either. She says maybe she was a
little hasty in what she said just before she came up here. But you
know Julie’s way.”
“Yes,” said Applegate, “I know Julie’s way.”
Hopson drew a breath of relief. He had at least discharged himself
of his intercessory mission.
“I tell Julie she’d better put up with it and go with MacDonald. The
life would be more the sort of thing she likes. But her head’s set and
she won’t hear to anything Henriette or I say. You see, that’s what
Julie holds by, what she thinks is respectable. And it’s about all she
does hold by.” He hesitated, groping blindly about in his
consciousness for words to express his feeling that this passionate,
reckless nature was only anchored to the better things of life by her
fervent belief in the righteousness of the established social order.
“Julie thinks everything of being respectable,” he concluded,
lamely.
“Is it much farther to your house?” asked Applegate, dully.
“Right here,” answered Hopson, pulling his key from his pocket.
They entered a crude little parlor whose carpet was too gaudy, and
whose plush furniture was too obviously purchased at a bargain, but
its air was none the less heavy with tragedy. A single gas-jet
flickered in the centre of the room. On one side a great, broad-
shouldered fellow sat doggedly with his elbows on his knees and his
face buried in his hands. There was resistance in every line of his
figure. On the sofa opposite was Julie in her crimson dress. As she
lifted her face eagerly, Applegate noticed traces of tears upon it. Mrs.
Hopson, who had been moving about the room aimlessly, a pale and
ineffective figure between these two vivid personalities, came to a
standstill and looked at Applegate breathlessly. For a moment no
one spoke. Then Julie, baffled by the eyes she could not read,
sprang to her feet and stretched out her hands with a vehement
gesture.
“John Applegate, you’ll put me right! You will. I know you will. I
can’t go back to him! How can I?” Her hungry eyes scrutinized his
still, inexpressive face.
“John, you aren’t going to turn me off?” Her voice had a despairing
passion in it. “You won’t refuse to marry me if I get the divorce?
Good God! You can’t be such a devil. John! oh, John!”
Applegate sat down and looked at her apathetically. He was not
used to being called a devil. Somehow it seemed to him the term
was misapplied.
“Don’t take on so, Julie,” he said, quietly. The room seemed to
whirl around him, and he added, with a palpable effort:
“I’ll think it over and try to do what is best for both of us.”
At that MacDonald lifted his sullen face from his hands for the first
time and glanced across at the other man with blood-shot eyes.
Then he rose slowly, his great bulk seeming to fill the room, and
walking over to Applegate’s chair stood in front of it looking down at
him. His scrutiny was long. Once Applegate looked up and met his
eyes, but he was too tired to bear their fierce light and dropped his
own lids wearily.
MacDonald turned from him contemptuously and faced his wife,
who averted her head.
“Look at me, Julie!” he cried, appealingly. “I am better worth it than
he is. Good Lord! I don’t see what you see in him. He’s so tame! Let
him go about his business. He’s nobody. He don’t want you. Come
along with me and we’ll lead a life! You shall cut a dash out there. I
can make money hand over fist. It’s the place for you. Come on!”
For a moment Julie’s eyes glittered. The words allured her, but her
old gods prevailed. She threw out her arms as if to ward off his
proposal.
“No, no,” she said, shrilly. “I cannot make it seem right. You were
dead to me, and I married him. One does not go back to the dead. If
I am your wife, what am I to him? It puts me in the wrong these two
years. I cannot have it so, I tell you. I cannot have it so!”
Applegate felt faint and sick. Rising, he groped for the door. “I
must have air,” he said to Hopson, confusedly. “I will come back in a
minute.”
Once outside, the cool November night refreshed him. He dropped
down upon the doorstep and threw back his head, drinking in long
breaths as he looked up at the mocking stars.
When he found at last the courage to ask himself what he was
going to do, the answer was not ready. The decision lay entirely in
his hands. He might still be free if he said the word; and as he
thought of this he trembled. He had always tried to be what his
neighbors called a straight man, and he wanted to be straight in this
also. But where, in such a hideous tangle, was the real morality to be
found? Surely not in acceding to Julie’s demands! What claim had
she upon the home whose simple traditions of peace and happiness
she had trampled rudely under foot? Was it not a poor, cheap
convention of righteousness which demanded he should take such a
woman back to embitter the rest of his days and warp his children’s
lives? He rebelled hotly at the thought. That it was Julie’s view of the
ethical requirement of her position made it all the more improbable
that it was really right. Surely his duty was to his children first, and as
for Julie, let her reap the reward of her own temperament. The Lord
God Himself could not say that this was unjust, for it is so that He
deals with the souls of men.
It seemed to him that he had decided, but as he rose and turned to
the door a new thought stabbed him so sharply that he dropped his
lifted hand with a groan.
Where had been that sense of duty to his children, just now so
imperative, in the days when he had yielded to Julie’s charm against
his better judgment? Had duty ever prevailed against inclination with
him? Was it prevailing now?
High over all the turmoil and desperation of his thoughts shone out
a fresh perception that mocked him as the winter stars had mocked.
For that hour at least, the crucial one of his decision, he felt assured
that in the relation of man and woman to each other lies the supreme
ethical test of each, and in that relation there is no room for
selfishness. It might be, indeed, that he owed Julie nothing, but
might it not also be that the consideration he owed all womankind
could only be paid through this woman he had called his wife? This
was an ideal with which he had never had to reckon.
He turned and sat him down again to fight the fight with a chill
suspicion in his heart of what the end would be.
Being a plain man he had only plain words in which to phrase his
decision when at last he came to it.
“I chose her and I’ll bear the consequences of my choice,” he said,
“but I’ll bear them by myself. His aunt will be glad to take Teddy, and
Dora is old enough to go away to school.” Then he opened the door.
Hopson and his wife had left the little parlor. Julie on the sofa had
fallen into the deep sleep of exhaustion. MacDonald still sat there,
with his head in his hands, and to him Applegate turned. At the
sound of his step the man lifted his massive head and shook it
impatiently.
“Well?” he demanded.
“The fact is, Mr. MacDonald, Julie and I don’t get along very well
together, but I don’t know as that is any reason why I should force
her to do anything that don’t seem right to her. She thinks it would be
more”—he hesitated for a word—“more nearly right to get a divorce
from you and remarry me. As I see it now, it’s for her to say what she
wants, and for you and me to do it.”
MacDonald looked at him piercingly.
“You know you’d be glad of the chance to get rid of her!” he
exclaimed, excitedly. “In Heaven’s name, then, why don’t you make
her come to me? You know I suit her best. You know she’s my sort,
not yours. She’s as uncomfortable with you as you with her, and
she’d soon get over the feeling she has against me. Man! There’s no
use in it! Why can’t you give my own to me?”
“I can’t say I don’t agree with you,” said Applegate, and the words
seem to ooze painfully from his white lips, “but she thinks she’d
rather not, and—it’s for her to say.”
A CONSUMING FIRE
He is a man who has failed in this life, and says he has no chance
of success in another; but out of the fragments of his failures he has
pieced together for himself a fabric of existence more satisfying than
most of us make of our successes. It is a kind of triumph to look as
he does, to have his manner, and to preserve his attitude toward
advancing years—those dreaded years which he faces with pale but
smiling lips.
If you would see my friend Hayden, commonly called by his friends
the connoisseur, figure to yourself a tall gentleman of sixty-five, very
erect still and graceful, gray-headed and gray-bearded, with fine gray
eyes that have the storm-tossed look of clouds on a windy March
day, and a bearing that somehow impresses you with an idea of the
gracious and pathetic dignity of his lonely age.
I myself am a quiet young man, with but one gift—I am a finished
and artistic listener. It is this talent of mine which wins for me a
degree of Hayden’s esteem and a place at his table when he has a
new story to tell. His connoisseurship extends to everything of
human interest, and his stories are often of the best.
The last time that I had the honor of dining with him, there was
present, besides the host and myself, only his close friend, that
vigorous and successful man, Dr. Richard Langworthy, the eminent
alienist and specialist in nervous diseases. The connoisseur
evidently had something to relate, but he refused to give it to us until
the pretty dinner was over. Hayden’s dinners are always pretty, and
he has ideals in the matter of china, glass, and napery which it would
require a woman to appreciate. It is one of his accomplishments that
he manages to live like a gentleman and entertain his friends on an
income which most people find quite inadequate for the purpose.
After dinner we took coffee and cigars in the library.
On the table, full in the mellow light of the great lamp (Hayden has
a distaste for gas), was a bit of white plush on which two large opals
were lying. One was an intensely brilliant globe of broken gleaming
lights, in which the red flame burned strongest and most steadily; the
other was as large, but paler. You would have said that the prisoned
heart of fire within it had ceased to throb against the outer rim of ice.
Langworthy, who is wise in gems, bent over them with an
exclamation of delight.
“Fine stones,” he said; “where did you pick them up, Hayden?”
Hayden, standing with one hand on Langworthy’s shoulder, smiled
down on the opals with a singular expression. It was as if he looked
into beloved eyes for an answering smile.
“They came into my possession in a singular way, very singular. It
interested me immensely, and I want to tell you about it, and ask
your advice on something connected with it. I am afraid you people
will hardly care for the story as much as I do. It’s—it’s a little too
rococo and sublimated to please you, Langworthy. But here it is:
“When I was in the West last summer, I spent some time in a city
on the Pacific slope which has more pawnbrokers’ shops and that
sort of thing in full sight on the prominent streets than any other town
of the same size and respectability that I have ever seen. One day,
when I had been looking in the bazaars for something a little out of
the regular line in Chinese curios and didn’t find it, it occurred to me
that in such a cosmopolitan town there might possibly be some
interesting things in the pawn-shops, so I went into one to look. It
was a common, dingy place, kept by a common, dingy man with
shrewd eyes and a coarse mouth. Talking to him across the counter
was a man of another type. Distinction in good clothes, you know,
one is never sure of. It may be only that a man’s tailor is
distinguished. But distinction in indifferent garments is distinction
indeed, and there before me I saw it. A young, slight, carelessly
dressed man, his bearing was attractive and noteworthy beyond
anything I can express. His appearance was perhaps a little too
unusual, for the contrast between his soft, straw-colored hair and
wine-brown eyes was such a striking one that it attracted attention
from the real beauty of his face. The delicacy of a cameo is rough,”
added the connoisseur, parenthetically, “compared to the delicacy of
outline and feature in a face that thought, and perhaps suffering,
have worn away, but this is one of the distinctive attractions of the
old. You do not look for it in young faces such as this.
“On the desk between the two men lay a fine opal—this one,” said
Hayden, touching the more brilliant of the two stones. “The younger
man was talking eagerly, fingering the gem lightly as he spoke. I
inferred that he was offering to sell or pawn it.
“The proprietor, seeing that I waited, apparently cut the young man
short. He started, and caught up the stone. ‘I’ll give you—’ I heard
the other say, but the young man shook his head, and departed
abruptly. I found nothing that I wanted in the place, and soon passed
out.
“In front of a shop-window a little farther down the street stood the
other man, looking in listlessly with eyes that evidently saw nothing.
As I came by he turned and looked into my face. His eyes fixed me
as the Ancient Mariner’s did the Wedding Guest. It was an appealing
yet commanding look, and I—I felt constrained to stop. I couldn’t
help it, you know. Even at my age one is not beyond feeling the force
of an imperious attraction, and when you are past sixty you ought to
be thankful on your knees for any emotion that is imperative in its
nature. So I stopped beside him. I said: ‘It is a fine stone you were
showing that man. I have a great fondness for opals. May I ask if you
were offering it for sale?’
“He continued to look at me, inspecting me calmly, with a
fastidious expression. Upon my word, I felt singularly honored when,
at the end of a minute or two, he said: ‘I should like to show it to you.
If you will come to my room with me, you may see that, and another;’
and he turned and led the way, I following quite humbly and gladly,
though surprised at myself.
“The room, somewhat to my astonishment, proved to be a large
apartment—a front room high up in one of the best hotels. There
were a good many things lying about which obviously were not hotel
furnishings, and the walls, the bed, and even the floor were covered
with a litter of water-color sketches. Those that I could see were
admirable, being chiefly impressions of delicate and fleeting
atmospheric effects.
“I took the chair he offered. He stood, still looking at me,
apparently not in haste to show me the opals. I looked about the
room.
“‘You are an artist?’ I said.
“‘Oh, I used to be, when I was alive,’ he answered, drearily. ‘I am
nothing now.’ And then turning away he fetched a little leather case,
and placed the two opals on the table before me.
“‘This is the one I have always worn,’ he said, indicating the more
brilliant. ‘That chillier one I gave once to the woman whom I loved. It
was more vivid then. They are strange stones—strange stones.’
“He said nothing more, and I sat in perfect silence, only dreading
that he should not speak again. I am not making you understand
how he impressed me. In the delicate, hopeless patience of his face,
in the refined, uninsistent accents of his voice, there was somehow
struck a note of self-abnegation, of aloofness from the world,
pathetic in any one so young.
“I am old. There is little in life that I care for. My interests are
largely affected. Wine does not warm me now, and beauty seems no
longer beautiful; but I thank Heaven I am not beyond the reach of a
penetrating human personality. I have at least the ordinary instincts
for convention in social matters, but I assure you it seemed not in the
least strange to me that I should be sitting in the private apartment of
a man whom I had met only half an hour before, and then in a
pawnbroker’s shop, listening eagerly for his account of matters
wholly personal to himself. It struck me as the most natural and
charming thing in the world. It was just such chance passing
intercourse as I expect to hold with wandering spirits on the green
hills of paradise.
“It was some time before he spoke again.
“‘I saw her first,’ he said, looking at the paler opal, as if it was of
that he spoke, ‘on the street in Florence. It was a day in April, and
the air was liquid gold. She was looking at the Campanile, as if she
were akin to it. It was the friendly grace of one lily looking at another.
Later, I met her as one meets other people, and was presented to
her. And after that the days went fast. I think she was the sweetest
woman God ever made. I sometimes wonder how He came to think
of her. Whatever you may have missed in life,’ he said, lifting calm
eyes to mine, and smiling a little, ‘you whose aspect is so sweet,
decorous, and depressing, whose griefs, if you have griefs, are the
subtle sorrows of the old and unimpassioned’—I remember his
phrases literally. I thought them striking and descriptive,” confessed
Hayden—“‘I hope you have not missed that last touch of exaltation
which I knew then. It is the most exquisite thing in life. The Fates
must hate those from whose lips they keep that cup.’ He mused
awhile and added, ‘There is only one real want in life, and that is
comradeship—comradeship with the divine, and that we call religion;
with the human, and that we call love.’
“‘Your definitions are literature,’ I ventured to suggest, ‘but they are
not fact. Believe me, neither love nor religion is exactly what you call
it. And there are other things almost as good in life, as surely you
must know. There is art, and there is work which is work only, and
yet is good.’
“‘You speak from your own experience?’ he said, simply.
“It was a home thrust. I did not, and I knew I did not. I am sixty-five
years old, and I have never known just that complete satisfaction
which I believe arises from the perfect performance of distasteful
work. I said so. He smiled.
“‘I knew it when I set my eyes upon you, and I knew you would
listen to me and my vaporing. Your sympathy with me is what you
feel toward all forms of weakness, and in the last analysis it is self-
sympathy. You are beautiful, not strong,’ he added, with an air of
finality, ‘and I—I am like you. If I had been a strong man.... Christ!’
“I enjoyed this singular analysis of myself, but I wanted something
else.
“‘You were telling me of the opals,’ I suggested.
“‘The opals, yes. Opals always made me happy, you know. While I
wore one, I felt a friend was near. My father found these in Hungary,
and sent them to me—two perfect jewels. He said they were the twin
halves of a single stone. I believe it to be true. Their mutual relation
is an odd one. One has paled as the other brightened. You see them
now. When they were both mine, they were of almost equal
brilliancy. This,’ touching the paler, ‘is the one I gave to her. You see
the difference in them now. Hers began to pale before she had worn
it a month. I do not try to explain it, not even on the ground of the old
superstition. It was not her fault that they made her send it back to
me. But the fact remains; her opal is fading slowly; mine is burning to
a deeper red. Some day hers will be frozen quite, while mine—mine
—’ his voice wavered and fell on silence, as the flame of a candle
fighting against the wind flickers and goes out.
“I waited many minutes for him to speak again, but the silence was
unbroken. At last I rose. ‘Surely you did not mean to part with either
stone?’ I said.
“He looked up as if from a dream. ‘Part with them? Why should I
sell my soul? I would not part with them if I were starving. I had a
minute’s temptation, but that is past now.’ Then, with a change of
manner, ‘You are going?’ He rose with a gesture that I felt then and
still feel as a benediction. ‘Good-by. I wish for your own sake that
you had not been so like my poor self that I knew you for a friend.’
“We had exchanged cards, but I did not see or hear of him again.
Last week these stones came to me, sent by some one here in New
York of his own name—his executor. He is dead, and left me these.
“It is here that I want your counsel. These stones do not belong to
me, you know. It is true that we are like, as like as blue and violet.
But there is that woman somewhere—I don’t know where; and I
know no more of their story than he told me. I have not cared to be
curious regarding it or him. But they loved once, and these belong to
her. Do you suppose they would be a comfort or a curse to her? If—if
—” the connoisseur evidently found difficulty in stating his position.
“Of course I do not mean to say that I believe one of the stones
waned while the other grew more brilliant. I simply say nothing of it;
but I know that he believed it, and I, even I, feel a superstition about
it. I do not want the light in that stone to go out; or if it should, or
could, I do not want to see it. And, besides, if I were a woman, and
that man had loved me so, I should wish those opals.” Here Hayden
looked up and caught Langworthy’s amused, tolerant smile. He
stopped, and there was almost a flush upon his cheek.
“You think I am maudlin—doting—I see,” he said. “Langworthy, I
do hope the Lord will kindly let you die in the harness. You haven’t
any taste for these innocent, green pastures where we old fellows
must disport ourselves, if we disport at all. Now, I want to know if it
would be—er—indelicate to attempt to find out who she is, and to
restore the stones to her?”
Langworthy, who had preserved throughout his usual air of strict
scientific attention, jumped up and began to pace the room.
“His name?” he said.
Hayden gave it.
“I know the man,” said Langworthy, almost reluctantly. “Did any
one who ever saw him forget him? He was on the verge of
melancholia, but what a mind he had!”
“How did you know him, Langworthy?” asked Hayden, with
pathetic eagerness.
“As a patient. It’s a sad story. You won’t like it. You had better keep
your fancies without the addition of any of the facts.”
“Go on,” said Hayden, briefly.
“They live here, you know. He was the only son. He unconsciously
acquired the morphine habit from taking quantities of the stuff for
neuralgic symptoms during a severe protracted illness. After he got
better, and found what had happened to him, he came to me. I had
to tell him he would die if he didn’t break it off, and would probably
die if he did. ‘Oh, no matter,’ he said. ‘What disgusts me is the idea
that it has taken such hold of me.’ He did break it off directly and
absolutely. I never knew but one other man who did that thing. But
between the pain and the shock from the sudden cessation of the
drug, his mind was unbalanced for awhile. Of course the girl’s
parents broke off the engagement. I knew they were travelling with
him last summer. It was a trying case, and the way he accepted his
own weakness touched me. At his own request he carried no money
with him. It was a temptation when he wanted the drug, you see. It
must have been at some such moment, when he contemplated
giving up the struggle, that you met him in the pawn-shop.”
“I am glad I knew enough to respect him even there,” murmured
Hayden, in his beard.
“Oh, you may respect him, and love him if you like. He died a
moral hero, if a mental and physical wreck. That is as good a way as
any, or ought to be, to enter another life—if there is another life.”
“And the woman?” asked the connoisseur.
“Keep the opals, Hayden; they and he are more to you than to her.
She—in fact it is very soon—is to marry another man.”
“Who is—”
“A gilded cad. That’s all.”
Langworthy took out his watch and looked at it. I turned to the
table. What had happened to the dreaming stones? Did a light flash
across from one to the other, or did my eyes deceive me? I looked
down, not trusting what I saw. One opal lay as pale, as pure, as
lifeless, as a moon-stone is. The other glowed with a yet fierier
spark; instead of coming from within, the color seemed to play over
its surface in unrestricted flame.
“See here!” I said.
Langworthy looked, then turned his head away sharply. The
distaste of the scientific man for the inexplicable and irrational was
very strong within him.
But the old man bent forward, the lamp-light shining on his white
hair, and with a womanish gesture caught the gleaming opal to his
lips.
“A human soul!” he said. “A human soul!”
AN UNEARNED REWARD
It is the very last corner of the world in which you would expect to
find a sermon. Overhead hang the Colorado skies, curtains of
deepest, dullest cobalt, against which the unthreatening white clouds
stand out with a certain solidity, a tangible look seen nowhere else
save in that clear air. All around are the great upland swells of the
mountains, rising endlessly, ridge beyond ridge, like the waves of the
sea. In a hollow beside the glittering track is the one sign of human
existence in sight—the sun-scorched, brown railway station. It is an
insignificant structure planted on a high platform. There is a red tool-
chest standing against the wall; a tin advertisement of somebody’s
yeast-cakes is nailed to the clap-boards; three buffalo hides, with
horns still on them, hang over a beam by the coal-shed, and across
the side of the platform, visible only to those approaching from the
west, is written, in great, black letters:
THE WAGES OF SIN IS DEATH.
This legend had no place there on the September afternoon, some
years ago, when Carroll Forbes stepped off the west-bound express
as it halted a minute at the desolate spot. Because it looked to him
like the loneliest place in all the world the notion seized him
suddenly, as the train drew up beside the high platform, to catch up
his valise and leave the car. He was looking for a lonely place, and
looking helplessly. He snatched at the idea that here might be what
he sought, as a drowning man at the proverbial straw.
When the train had gone on and left him there, already repenting
tremulously of what might prove his disastrous folly, a man, who was
possibly the station agent—if this were indeed a station—came
limping toward him with an inquiring look.
Forbes was a handsome man himself, and thoroughly aware of
the value of beauty as an endowment. He was conscious of a half-
envious pang as he faced the blonde giant halting across the
platform. This was, or had been, a singularly perfect specimen of the
physical man. Over six feet in height, muscular, finely proportioned,
fair-haired and fair-skinned, with a curling, blonde beard, and big,
expressionless blue eyes, he looked as one might who had been
made when the world was young, and there was more room for
mighty men than now.
The slight, olive-skinned young man who faced him was conscious
of the sudden feeling of physical disadvantage that comes upon one
in the presence of imposing natural objects, for the man was as
august in his way as the cliffs and canyons.
“I am a—an artist,” said Carroll Forbes. “Is there any place
hereabouts where I can get my meals and sometimes a bed, while I
am sketching in the mountains?”
The man stared at him.
“Would it have been better if I had said I was a surveyor?” asked
Forbes of his confused inner consciousness.
“We feed folks here sometimes—that is, my wife does. Mebbe you
could have a shake-down in the loft. Or there’s Connor’s ranch off
north a ways. But they don’t care about taking in folks up there.”
“Then, if you would ask your wife?” ventured Forbes, politely. “I
shall not trouble you long,” he added.
“Ellen!”
A woman appeared at the door, then moving slowly forward, stood
at her husband’s side, and the admiration Forbes had felt at the sight
of the man flamed into sudden enthusiasm as he watched the wife.
She was tall, with heavy, black hair, great eyes like unpolished jet,
one of the thick white, smooth, perfectly colorless skins, which
neither the sun nor the wind affect, and clear-cut, perfect features.
Standing so, side by side, the two were singularly well worth looking
at.
“What a regal pair!” was Forbes’s internal comment; and while
they conferred together he watched them idly, wondering what their
history was, for of course they had one. It is safe to affirm that every
human creature cast in the mould of the beautiful has, or is to have,
one.
“She says you c’n stay,” announced the man. “Just put those traps
of yours inside, will you?” and, turning, he limped off the length of the
platform at a call from somebody who had ridden up with jingling
spurs.
Forbes, left to his own devices, picked up his valise, then set it
down again and looked around him helplessly, wondering if there
was a night train by which he could get away from this heaven-
forsaken spot.
“If you want to see where you can sleep,” said a voice at his side,
“I will show you.” It was the woman. She bent as she spoke to pick
up some of his impedimenta, but he hastily forestalled her with a
murmur of deprecation.
She turned and looked at him, and as he met her eyes it occurred
to him that the indifference of her face was the indifference of the
desert—arid and hopeless. The look she gave him was searching
and impersonal; he saw no reason for it, nor for the slow, dark color
that spread over her face, and there was less than no excuse for the
way she set her lips and stretched a peremptory hand, saying, “Give
me those,” in tones that could not be disobeyed. To his own
astonishment he surrendered them, and followed her meekly up a
ladder-like flight of steps to the rough loft over the station. It was
unfinished, but partitioned into two rooms. She opened the door of
one of these apartments, silently set his luggage inside, and
vanished down the stairs.
Forbes sat down on the edge of a broken chair and looked about
him.
“Now, in heaven’s name,” he demanded of the barren walls, “what
have I let myself in for, and why did I do it?”
To this question there seemed no sufficient answer, and for awhile
he sat there fretting with the futile anxiety of a man who knows that
his fate pursues him, who hopes that this turning or that may help
him to evade it, yet always feels the benumbing certainty that the
path he has taken is the shortest road to that he would avoid. When
at last—recognizing that his meditations were unprofitable—he rose
and went down the stairs, it was supper-time.
The woman was uncommunicative, but he could feel that her eyes
were on him. The man—it occurred to Forbes that he had probably
been drinking—was talkative. After the meal was over they went
outside. Forbes, by way of supporting his pretence of being an artist,
took out a pocket sketch-book and made notes of the values of the
clouds and the outlines of the hills against the sky in a sort of artistic
short-hand. The man Wilson sat down on a bench and began to talk.
Between the exciting effects of the whiskey he had taken, the
soothing influence of the cigar Forbes proffered him, and a natural
talent for communicativeness, he presently went on to tell his own
story. Forbes listened attentively. It seemed a part of the melodrama
of the whole situation and was as unreal to him as the flaming
miracle of the western skies or his own presence here.
“So the upshot of it all was that we just skipped out. She ran away
with me.”
It was a curious story. As Forbes listened he became aware that it
was one with which he had occasionally met in the newspapers, but
never in real life before. It was, apparently, the story of a girl
belonging to a family of wealth and possibly of high social traditions
—naturally he did not know what importance to attach to Wilson’s
boast that his wife belonged “to the top of the heap”—who had
eloped with the man who drove her father’s carriage.
The reasons for this revolt against the natural order of her life was
obscure; there was, perhaps, too high a temper on her side and too
strict a restraint on the part of her guardians. There was necessarily
a total absence of knowledge of life; there was also the fact that the
coachman was undoubtedly a fine creature to look at; there might
have been a momentary yielding on the part of a naturally dramatic
temperament to the impulse for the spectacular in her life.
But whatever the reasons, the result was the same. She had
married this man and gone away with him, and they had drifted
westward. And when they had gone so far west that coachmen of his
stamp were no longer in demand, he took to railroading, and from
brakeman became engineer; and finally, being maimed in an
accident in which he had stood by his engine while the fireman
jumped—breaking his neck thereby—he had picked up enough
knowledge of telegraphy to qualify him for this post among the
mountains. He and his handsome wife lived here and shared the
everlasting solitude of the spot together, and occasionally fed stray
travellers like this one who had dropped down on them to-day.
“He drinks over-freely and he swears profusely,” mused Forbes,
scrutinizing him, “but he is too big to be cruel, and he still worships
her beauty as she, perhaps, once worshipped his; and he still feels
an uncouth pride in all that she gave up for his sake.”
It had never occurred to him before to wonder what the after-life of
a girl who eloped with her father’s servant might be like. He
speculated upon it now. By just what process does a woman so
utterly déclassée adjust herself to her altered position? Would she
make it a point to forget, or would every reminder of lives, such as
her own had been, be a turning of the knife in her wound? Would not
a saving recollection of the little refinements of life cling longer to a
weak nature than to a strong one under such circumstances?
This woman apparently gave tongue to no vain regrets, for her
husband was exulting in the “grit” with which she had taken the
fortunes of their life. “No whine about her,” was his way of expressing
his conviction that the courage of the thoroughbred was in her.
“No, sir; there’s no whine about her. Un she’s never been sorry,
un, s’help me, she sha’n’t never be,” concluded Wilson. There were
maudlin tears in his eyes.
“Few men can say that of their wives,” said Forbes’s smooth,
sympathetic voice. “You are indeed fortunate.”
While her husband was repeating the oft-told tale of their conjugal
happiness, Ellen Wilson had done her after-supper work, and,
slipping out of the door, climbed the short, rocky spur to the north of
the station. Beyond the summit, completely out of sight and hearing,
there was a little hollow that knew her well, but never had it seen her
as it saw her now, when, throwing herself down, her face to the
earth, she shed the most scalding tears of all her wretched years.
They were such little things this stranger had done—things so
slight, so involuntary, so unconscious that they did not deserve the
name of courtesies, but they were enough to open the flood-gates of
an embittered heart. There was a world where all the men were
deferential and all the women’s lives were wrapped about with the
fine, small courtesies of life—formal, but not meaningless. It had
been her world once and now was so no longer.
Good or bad, she knew little and cared less, this man had come
from that lost world of hers, as she was made aware by a thousand
small signs, whose very existence she had forgotten; and silently,
fiercely she claimed him as an equal.
“I—I too was—” Slow tears drowned the rest.
She could have told him how a déclassée grows used to it. She
knew how the mind can adjust itself to any phase of experience, and
had learned that what woman has undergone, woman can undergo
—yes, and be strong about it. She knew how, under the impulse of
necessity, the once impossible grows to be the accepted life, and the
food that could not be swallowed becomes the daily bread.
When the struggle for existence becomes a hand-to-hand fight,
traditions of one’s ancestry do not matter, except, possibly, that some
traditions bind you to strength and silence, while others leave you
free to scream. She knew what it was to forget the past and ignore
the future, and survey the present with the single-hearted purpose of
securing three meals a day, if possible; two, if it were not.
She had forgotten with what facility she might the faces and
scenes that once were dear to her. She had nothing to do with them
any longer, as she knew. She might, perhaps, have heard their
names without emotion. But, even in this day and generation and
among this democratic people, in the soul of a woman bred as she
had been the feeling for her caste is the last feeling that dies. And to
her anguish she found that in her it was not yet dead.
The color died from the sky, and the stars came swiftly out.

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III. Differences in accounting across countries cause several problems.

comparisons across potential investments because of differences in accounting rules

1. Determine applicable IFRS accounting policies based on standards in force on the

X. Numerous differences exist between IFRS and U.S. GAAP.

Answer to Discussion Question: Which Accounting Method Really is Appropriate?

Problems 15-19 are based on the comprehensive illustration.

15. (15 minutes) (Carrying inventory at the lower of cost or “market”)

Historical cost $120,000

16. (25 minutes) (Measurement of property, plant, and equipment subsequent to

2. Under IFRS, the equipment would be depreciated by $11,400 in 2015, resulting

Depreciation expense on a straight-line basis in 2016, 2017, and beyond would

The differences can be summarized as follows:

Depreciation expense 2015 2016 2017

Book value of equipment 12/31/15 12/31/16 12/31/17

In 2016, the additional amount of depreciation expense of $1,500 related to the

17. (15 minutes) (Research and development costs)

Research and development costs $650,000 (30% related to development)

a. 1. Under U.S. GAAP, $650,000 of research and development costs would be

2. In accordance with IAS 38, $455,000 [$650,000 x 70%] of research and

In 2016, the company would recognize $19,500 [$195,000 / 10 years] of

18. (15 minutes) (Gain on sale and leaseback transaction)

Gain on sale of asset $76,000

19. (20 minutes) (Impairment of property, plant, and equipment)

Cost of equipment $135,000

In 2016, depreciation under IFRS will be $25,000 [$100,000 / 4 years], whereas

IFRS U.S. GAAP

Chapter 11 Develop Your Skills

Analysis Case 1—Application of IAS 16

Depreciation expense in Years 1 and 2 under both sets of rules: $10,000,000 / 20

Dr. Building $3,000,000

a. Depreciation Expense Year 2 Year 3 Year 4

b. Book Value of Building 1/2/Y3 12/31/Y3 12/31/Y4

Analysis Case 2— Reconciliation of IFRS to U.S. GAAP

Explanation for adjustments:

1. Under IFRS – Quantacc recorded a Revaluation Surplus (stock equity account) of

Under U.S. GAAP – neither of these would have been recognized.

2. Under IFRS – Quantacc recognized a gain on sale/leaseback of $200,000 in 2014.

Under GAAP – Quantacc would recognize a gain on sale/leaseback of $10,000 in

To reconcile from IFRS to GAAP – subtract a total of $180,000 from IFRS

3. Under IFRS – Quantacc recognized a development cost asset of $80,000 in 2014.

Under GAAP – Quantacc would have expensed development costs of $80,000 in

Research Case—Reconciliation to U.S. GAAP

In addition, students may find EDGAR to be of limited use in accessing foreign

Communication Case—Voluntary Adoption of IFRS

Internet Case—Foreign Company Annual Report

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