Analysis case 1 application of IAS 16 -Advanced Accounting Abacab Company's shares are listed on the New Market Stock Exchange, which allows the use

Analysis case 1 application of IAS 16 –Advanced AccountingAbacab Company's shares are listed on the New Market Stock Exchange, which allows the use of either international financial reporting standards (IFRS) or U.S. GAAP. On Jan 1, Year 1, Abacab Company acquired a building at a cost of $10 million. The building has a 20-yr. useful life and no residual value and is depreciated on a straight-line basis. On January 1, Year 3, the company hired an appraiser who determines the fair value of the building (net of any accumulated depreciation) to be $12 million. IAS16, "Property, plant, and equipment," requires assets to be initially measured at cost. Subsequent to initial recognition, assets may be carried either at cost less accumulated depreciation and any impairment losses (the cost model) or at a revalued amount equal to fair value at the date of the revaluation less any subsequent accumulated depreciation and impairment losses (the revaluation model). If a firm chooses to use the revaluation model, the counterpart to the revaluation of the asset is recorded as an increase in Accumulated Other Comprehensive Income (stockholders' equity). Subsequent depreciation is based on the revalued amount less any residual value. (U.S.GAAP) required items of property, plant, and equipment to be initially measured at cost. U.S.GAAP does not allow property, plant, and equipment to be revalued above original cost at subsequent balance sheet dates. The cost of property, plant, and equipment must be depreciated on a systematic basis over its useful life. Subsequent to initial recognition, assets must be carried at cost less accumulated depreciation and any impairment loss. a) Determine the amount of depreciation expense recognized in Year 2, Year 3, and Year 4 under (a) the revaluation model of IAS 16 and (b) U.S. GAAP. b) Determine the book value of the building under the two different sets of accounting rules at January 2, Year 3; December 31, Year 3; and December 31, Year 4.C) summarize the difference in net income and in stockholders’ equity over the 20-year life of the building using the 2 different sets of accounting rules.