IFRSJan Pascual GAAP
& U.S.
by
Overview
Background
- IFRS
- U.S. GAAP
Similarities
Differences
Impact on U.S.
Benefits
Conclusion
IFRS
International Financial Reporting Standards
Established by International Accounting Standards Board
(IASB)
Over
P1-4.
Marginal cost-benefit analysis and the goal of the firm
a. Marginal benefits of new robotics Marginal benefits of original robotics = Marginal benefits of proposed robotics
$560,000 $400,000 = $160,000
b. Marginal cost of new robotics Sales price of
P1-3.
Cash flow statement
LG 4; Intermediate
Total cash inflow: $450 + $4,500 = $4,950
Total cash outflow: $1,000 + $500 + $800 + $355 + $280 + $1,200 + $222 = $4,357
b. Net cash flow: $4,950 $4,357 = $593
c. If Jane is facing a shortage, she could cut ba
E3-3.
Statement of retained earnings
Answer:
Cooper Industries, Inc.
Statement of Retained Earnings ($000)
for the Year Ended December 31, 2012
Retained earnings balance (January 1, 2011)
$25,320
Plus: Net profits after taxes (for 2012)
5,150
Less: Cash d
P7-5.
Personal finance: Common stock valuationzero growth: P0 = D1 rs
LG 4; Basic
a.
b.
c.
P0 = $2.40 0.12 = $20
P0 = $2.40 0.20 = $12
As perceived risk increases, the required rate of return also increases, causing the
stock price to fall.
P6-25. Bond valuationsemiannual interest
LG 6; Intermediate
Bond
Computer
Inputs
Calculator Solution
A
N = 24, I = 4%, PMT = $50, FV = $1,000
$1,152.47
B
N = 40, I = 6%, PMT = $60, FV = $1,000
$1,000.00
C
N = 10, I = 7%, PMT = $30, FV = $500
$ 464.88
D
N
P6-23. Personal finance: Bond valuation and yield to maturity
LG 2, 5, 6; Challenge
a. N = 5, I = 12%, PMT = 0.06 $1,000 = $60; FV = $1,000
Solve for PV = $783.71
N = 5, I = 12%, PMT = 0.14 $1,000 = $140; FV = $1,000
Solve for PV = $ 1,072.10
b.
Number of
P6-21. Yield to maturity
LG 6; Intermediate
a. Using a financial calculator, the YTM is 12.685%. The correctness of this number is
proven by putting the YTM in the bond valuation model. This proof is as follows:
N = 15, I = 12.685%, PMT = $120, FV = $1,00
P6-20. Yield to maturity
LG 6; Basic
Bond A is selling at a discount to par.
Bond B is selling at par value.
Bond C is selling at a premium to par.
Bond D is selling at a discount to par.
Bond E is selling at a premium to par.
P6-19. Personal finance: Bond value and timechanging required returns
LG 5; Challenge
a.
Bond
Calculator Inputs
Calculator Solution
(1)
N = 5, I = 8%, PMT = $110, FV = $1,000
$1,119.78
(2)
N = 5, I = 11%, PMT = $110, FV = $1,000
$1,000.00
(3)
N = 5, I = 1
P6-16. Bond valuationannual interest
LG 5; Basic
Bond
Calculator Inputs
Calculator Solution
A
N = 20, I = 12, PMT = 0.14 $1,000 = $140, FV =
1,000
$1,149.39
B
N = 16, I = 8, PMT = 0.08 $1,000 = $80, FV =
$1,000
$1,000.00
C
N = 8, I = 13, PMT = 0.10 $100 =
P6-15. Basic bond valuation
LG 5; Intermediate
a. I = 10%, N = 16, PMT = $120, FV = $1,000
Solve for PV = $1,156.47
b. Since Complex Systems bonds were issued, there may have been a shift in the
supply-demand relationship for money or a change in the risk
P6-13. Valuation of assets
LG 4; Basic
Asset
End of Year
A
Present Value of
Cash Flows
Amount
N = 3, I =
18
PMT =
$5,000
$10,871.36
300
1 0.15
$2,000
N = 5, I =
16
FV =
$35,000
$16,663.96
1
$ 5,000
2
$ 5,000
3
$ 5,000
B
1
C
1
0
2
0
3
4
0
0
$35,000
15
$ 1,
P6-11. Bond prices and yields
LG 4; Basic
a. 0.97708 $1,000 = $977.08
b. (0.05700 $1,000) $977.08 = $57.000 $977.08 = 0.0583 = 5.83%
c. The bond is selling at a discount to its $1,000 par value.
d. The yield to maturity is higher than the current yield, b
P6-10. Bond interest payments before and after taxes
LG 2; Intermediate
a. Yearly interest = [($2,500,000/2500) 0.07] = ($1,000 0.07) = $70.00
b. Total interest expense = $70.00 per bond 2,500 bonds = $175,000
c. Total before tax interest
$175,000
Interes
P6-8.
Risk-free rate and risk premiums
LG 1; Basic
a. Risk-free rate: RF = r* + IP
Security
r*
IP
RF
+
=
A
3%
+
6%
=
9%
B
3%
+
9%
=
12%
C
3%
+
8%
=
11%
D
3%
+
5%
=
8%
E
3%
+
11%
=
14%
b.
Since the expected inflation rates differ, it is probable that the m
P6-3.
Personal finance: Real and nominal rates of interest
LG 1; Intermediate
a. 4 shirts
b. $100 + ($100 0.09) = $109
c. $25 + ($25 0 .05) = $26.25
d. The number of polo shirts in one year = $109 $26.25 = 4.1524. He can buy 3.8%
more shirts (4.1524 4 = 0
P5-61. Personal finance: Time to repay installment loan
LG 6; Intermediate
a. I = 12%, PV = $14,000, PMT = $2,450
Solve for N = 10.21 years
b. I = 9%, PV = $14,000, PMT = $2,450
Solve for N = 8.38 years
c. I = 15%, PV = $14,000, PMT = $2,450
Solve for N =
P5-60. Number of years to provide a given return
LG 6; Intermediate
A I = 11%, PV = $1,000, PMT = $250
$30,000
Solve for N = 5.56 years
B
I = 15%, PV = $150,000, PMT =
Solve for N = 9.92 years
C I = 10%, PV = $80,000, PMT = $10,000 D I = 9%, PV = $600, PM
P5-59. Personal finance: Time to accumulate a given sum
LG 6; Intermediate
a. I = 10%, PV = $10,000, FV = $20,000
Solve for N = 7.27 years
b. I = 7%, PV = $10,000, FV = $20,000
Solve for N = 10.24 years
c. I = 12%, PV = $10,000, FV = $20,000
Solve for N =
P5-58. Number of years to equal future amount
LG 6; Intermediate
I = 7%, PV = $300, FV = $1,000
$15,000
Solve for N = 17.79 years
C I = 10%, PV = $9,000, FV = $20,000
Solve for N = 8.38 years
E I = 15%, PV = $7,500, FV = $30,000
Solve for N = 9.92 years
A
P5-56. Personal finance: Interest rate for an annuity
LG 6; Challenge
a. Defendants interest rate assumption
N = 25, PV = $2,000,000, PMT = $156,000
Solve for I = 5.97%
b. Prosecution interest rate assumption
N = 25, PV = $2,000,000, PMT = $255,000
Solve
P5-55. Personal finance: Choosing the best annuity
LG 6; Intermediate
a. Annuity A
Annuity B
N = 20, PV = $30,000, PMT = $3,100
N = 10, PV = $25,000, PMT =
$3,900
Solve for I = 8.19%
Solve for I = 9.03%
Annuity C
Annuity D
N = 15, PV = $40,000, PMT = $4,2
P5-53. Personal finance: Rate of return and investment choice
LG 6; Intermediate
N = 6, PV = 5,000, FV = $8,400
B N = 15, PV = $5,000, FV =
$15,900
Solve for I = 9.03%
Solve for I = 8.02%
C N = 4, PV = $5,000, FV = $7,600
D N = 10, PV = $5,000, FV
= $13,0