IFRS	U.S. GAAP
4. May use either cost model or revaluation model to a PPE class.	4. Require cost model and prohibit revaluation model for PPE.
5. Each part of an item of PPE with a cost that is significant in relation to the total cost shall be depreciated separately	5. Take a holistic view of PPE depreciation instead of the IFRS component approach.

Using the chart above: Discuss which accounting treatment (IFRS, U.S. GAAP, or another new treatment from your own insight) is best for decision usefulness in terms of assessing an entitys cash flow prospects. You may want to think critically about pro(s) and con(s) of each accounting treatment per IFRS vs. per U.S. GAAP.

Be sure to provide specific justifications to support your answers. These justifications should be based upon the following.

1. Potential effects of an accounting treatment on economic resources, claims to these resources and changes in these resources and claims. Do such effects better enable capital providers to assess amount, timing and uncertainty of future cash flows?

2. Discuss which specific characteristics of useful financial information in Conceptual Framework.doc your favored accounting treatment supports. (Feel free to read Conceptual Framework for IFRS.pdf) There are three groups of these characteristics.

- Fundamental characteristics: Relevance and Faithful representation, each of which has three supporting elements.

- Enhancing characteristics: Comparability, Verifiability, Timeliness and Understandability.

- Cost constraint, i.e., costs < benefits.

Part II: FOR DIFFERENCE #4

Under IFRS, if fair value of land is appreciating and fair value of office equipment is depreciating, which measurement model (cost or revaluation) would you suggest for measuring land vs. office equipment? Use the Conceptual Framework to justify your answer. Your answer here should be consistent with your answer to difference #4.

Please keep in mind that the following justifications are NOT acceptable for either Parts I or II.

1. The treatment leads to better financial performance, e.g., higher earnings or assets. Such justification is for companies like Enron, WorldCom or Parmalat.

2. Better matching of revenue and expenses: Matching principle is GONE from the conceptual framework because revenue and expenses are defined in terms of a decrease or increase in assets and liabilities.

3. More conservative treatment: Conservatism is NOT part of the conceptual framework because it contradicts with "Faithful Representation".