2. Bianchi SPA, an Italian manufacturing firm, uses IFRS. On 1/1/2012, Bianchi p

Question

2. Bianchi SPA, an Italian manufacturing firm, uses IFRS. On 1/1/2012, Bianchi purchased equipment for S1,000,000. The equipment's useful life is 10 years. It has no residual value. On 1/1/2014, the company chose to revalue the equipment. The fair value of the equipment was $1,200,000. No revaluation was performed in 2015 The company's shareholders' equity as of the end of 2015 is $100 million. What would have been the reported shareholders' equity had the company used U.S. GAAP instead of IFRS? Ignore any tax effects

Explanation / Answer

Depreciation for 2 Years upto 1/1/2014 = 1000000/10*2 = $200000

Therefore, Value of equipment = 1200000-800000 = $400000

Therefore, Depreciation for 2014 according to Straight Line Method = $100000

Shareholder Equity at 2015 end = $100 Million - 400000 - 100000 = $99.5 Million

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