X Inc. and Y Inc. are virtually identical companies with identical cost structures and very similar business
Question:
X Inc. and Y Inc. are virtually identical companies with identical cost structures and very similar business practices operating in the same lines of business. X Inc. is a public company based in Canada and follows IFRS while Y Inc. is a private enterprise based in Canada and follows ASPE. The following were the condensed income statements for both companies for the last year before both adopted IFRS.
X Inc. | Y Inc. | |
Sales: | $1,000,000 | $2,000,000 |
Less: | ||
Cost of Goods Sold | $500,000 | $1,600,000 |
Gross Margin | $500,000 | $400,000 |
Administrative Expenses | $200,000 | $300,000 |
Net Income: | $300,000 | $100,000 |
Given the information provided, what are some possible causes for the differing results of these companies?
Intermediate Accounting
ISBN: 978-0470161012
9th Canadian Edition, Volume 2
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield.