LGS Inc. is a private company. You have recently been hired as the CFO for the company and are currently finalizing the company year-end report for December 31, 2020. The company has an option to follow either IFRS or ASPE, and has not yet made the choice. Three situations have arisen affecting the company's reporting of income taxes. These situations are described below. Year-end tax rates are 28%. 

1. Shortly after you were hired, you found that a prior period adjustment had been made in 2019, and the Deferred Tax Liability account was adjusted through retained earnings as part of this error correction. The difference between the accounting value and the tax base of the related asset is $1 million. Originally, the rate used to record the deferred tax liability was 25%. In 2020, the enacted tax rate on this difference is now 28% and therefore an adjustment must be made to the Deferred Tax Liability account. 

2. The company has a building that has recently been appraised at a fair value of $10 million. Currently, the building's carrying amount is $6.5 million and its original cost was $8 million. Accumulated capital cost allowance booked to date on the building is $2.3 million. (Ignore the one-time adjustments allowed to property, plant, and equipment for first-time adopters of IFRS or ASPE.) 

3. LGS bought some equity investments during the year that are not publicly traded for a total cost of $340,000. The company purchased these as an investment to be sold in the near future. Currently, the shares have been valued at $510,000 as at December 31, 2020. There were no dividends received on this investment during the year. 

Instructions 

a. For each of the situations described above, access and review the published ASPE and IFRS accounting standards covering income taxes. Discuss the options for measuring and reporting the income tax implications under both IFRS and ASPE, noting the sections of the income tax standards that relate to the specific issues. As stated in item (1), the tax rate increased to 28% in 2020, and no accounting adjustments for this have been made up to the current date. 

b. Summarize the balance sheet and income statement effects of the ASPE and IFRS requirements identified in part (a) above. Analyze the results and comment on your findings.