How even Inc. is a private company that expects to go public and become publicly traded soon.
Question:
1. The first is to continue using the cost model as the company has been doing. The company currently uses the straight-line method of depreciation for all of its assets.
2. The second option is that the company, on transition at January I, 2014, can elect to revalue all of its property, plant, and equipment to fair value. This is a one-time increase in value that is allowed for first-time adopters of IFRS. The company would still use the cost model to depreciate this new value (which becomes the deemed cost) in subsequent years.
3. The third option is to adopt the revaluation model for just the "Property and plant" assets. The company would continue to use the cost model for the equipment, as fair market values are not readily available for this type of asset.
The controller has estimated the following numbers at January 1, 2014 (debt is expected to be $ 1,700 million):
Instructions
You are the Vice President Finance and must prepare a memo to the board explaining these options. Using the numbers in the table to assist you, discuss the implications of the three options on the balance sheet, income statement, bonuses, and the debt to fixed asset covenant.
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Related Book For
Intermediate Accounting
ISBN: 978-0176509736
10th Canadian Edition, Volume 1
Authors: Donald Kieso, Jerry Weygandt, Terry Warfield, Nicola Young,
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