Madison Company acquired a depreciable asset at the beginning of Year 1 at a cost of $12 million. At December 31, Year 1, Madison gathered the following information related to this asset:

Carrying amount (net of accumulated depreciation) …………………$10 million

Fair value of the asset (net selling price) …………………………….       $7.5 million

Sum of future cash flows from use of the asset ……………………..   $10 million

Present value of future cash flows from use of the asset ………… $8 million

Remaining useful life of the asset …………………………….........……...     5 years

Required:
a. Determine the impact on Year 2 and Year 3 income from the depreciation and possible impairment of this equipment under (1) IFRS and (2) U.S. GAAP.

b. Determine the difference in income, total assets, and total stockholders' equity for the period of Years 1-6 under the two different sets of accounting rules.

If the asset is determined to be impaired, there would be no adjustment to Year 1 depreciation expense of $2 million.