Polycom Corporation is a U$.$S$.-$based company that prepares its consolidated financial statements in accordance with U$.$S$.$ GAAP. The company reported after$-$tax income in $2022$ of $$700,000$ and stockholders$$ equity at December $31,2022,$ of $$8,000,000.$ Polycom$$s marginal tax rate for $2022$ is $21\%.$ The CFO of Polycom has learned that the U$.$S$.$ Securities and Exchange Commission is considering giving U$.$S$.$ companies the option of using either U$.$S$.$ GAAP or IFRS in preparing consolidated financial statements.

The company wishes to determine the impact that a switch to IFRS would have on its financial statements and has engaged you to prepare a reconciliation of income and stockholders$$ equity from GAAP to IFRS. You have identified the following five areas in which Polycom$$s accounting principles based on U$.$S$.$ GAAP differ from IFRS.

$1.$ Inventory

$2.$ Property, plant and equipment

$3.$ Purchased intangible assets

$4.$ Research and development costs

Polycom provides the following information with respect to each of these accounting differences.

$1.$ Inventory

At year$-$end $2022,$ inventory had a historical cost of $$250,000,$ a replacement cost of $$180,000,$ a net realizable value of $$190,000,$ and the normal profit margin was $20$ percent. Polycom uses FIFO method of accounting for inventory.

$2.$ Property, Plant, and Equipment

The company acquired a building at the beginning of $2022$ at a cost of $$2,750,000.$ The building has an estimated useful life of $25$ years, an estimated residual value of $$250,000,$ and is being depreciated on a straight$-$line basis. At the end of $2022$ the building was appraised and determined to have a fair value of $$2,700,000.$ There is no change in estimated useful life or residual value. In a switch to IFRS, the company would use the revaluation model $($Fair Market Value$)$ in IAS $16$ to determine the carrying value of property, plant, and equipment subsequent to acquisition.

$3.$ Purchased Intangible Assets

As part of a business combination in $2022,$ the company acquired a brand with a fair value of

$$40,000.$ The brand is classified as an intangible asset with an indefinite life. At year$-$end $2022,$ the brand is determined to have a selling price of $$35,000$ with zero cost to sell. Expected future cash flows from continued use of the brand are $$42,000$ and the present value of the expected future cash flows is $$36,000.$

$4.$ Research and Development Costs

The company incurred research and development costs of $$200,000$ in $2022.$ Of this amount, $40\%$ related to development activities. As of the end of the $2022,$ development of the new product had not been completed.

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Required:

$1.$ Prepare a reconciliation schedule $($use the templates on the following pages$)$ to convert $2022$ after$-$tax income and December $31,2022,$ stockholders$$ equity from a U$.$ S$.$ GAAP basis to IFRS. Prepare a note to explain each adjustment made in the reconciliation schedule.

$2.$ Compare the return on equity based on US GAAP to the return on equity based on IFRS.