3-21 Solutions
d. Under both U.S. GAAP and IFRS, common stock does not meet the
Solutions 3-22
3.24 continued.
3.25 (Berlin Philharmonic; liability recognition and measurement.)
a. Under both U.S. GAAP and IFRS, the Berlin Philharmonic would record
d. Under both U.S. GAAP and IFRS, the Berlin Philharmonic would not
normally recognize a liability for an unsettled lawsuit unless payment is
probable and the entity can reliably estimate the loss. Because the suit has
not yet come to trial, it is unclear whether any liability exists.
3.26 (Beyond Petroleum; liability recognition and measurement.)
Under both U.S. GAAP and IFRS, the recognition of a loss contingency requires
3-23 Solutions
Solutions 3-24
3.26 continued.
a. Refer to the above discussion of the recognition criteria under both U.S.
GAAP and IFRS. The information given indicates that engineers view the
b. The probability of loss is now 51%. This meets the probable threshold
under IFRS, but not under U.S. GAAP. Therefore, IFRS will show a liability
c. Under the environmentalists’ estimates, there is a 100% probability of loss.
Thus, both U.S. GAAP and IFRS would record a liability. The amount of the
d. Under the environmentalists’ estimates, the probability of loss is 85%. This
3-25 Solutions
3.27 (Magyar Telekom; effect of recording errors on balance sheet equation.)
(Amounts in Millions)
Transaction Shareholders’
Number Assets = Liabilities + Equity
(1) No No No
(2) O/S HUF 900 O/S HUF 900 No
3.28 (Sivensa; effect of recording errors on balance sheet equation.) (Amounts in
Thousands)
Transaction Shareholders’
Number Assets = Liabilities + Equity
aThe response “No” is also acceptable here.
Solutions 3-26
3.29 (Cathay Pacific; balance sheet format, terminology, and accounting methods.)
[Amounts in Millions of HK Dollars (HKD)]
a. CATHAY PACIFIC AIRWAYS LIMITED
Balance Sheet, U.S. GAAP
(Amounts in Millions of HKD)
December 31,
2007 2006
Assets
Current Assets:
Inventoryb ……………………………………………… 882 789
Assets Pledged Against Current
Noncurrent Assets:
Investments in Associates …………………… 10,054 8,826
Intangible Assets ………………………………….. 7,782 7,749
Liabilities and Shareholders’ Equity
Current Liabilities:
3-27 Solutions
Total Liabilities ………………………………….. 75,666 66,709
Solutions 3-28
3.29 a. continued.
Terminology (differences from account names reported by Cathay Pacific).
b. CATHAY PACIFIC AIRWAYS LIMITED
Balance Sheet, IFRS
(Amounts in Millions of HKD)
December 31,
2007 2006
Assets
Noncurrent Assets:
Intangible Assets ………………………………….. HKD 7,782 HKD 7,749
3-29 Solutions
3.29 b. continued.
Liabilities and Shareholders’ Equity
Noncurrent Liabilities:
Long-Term Liabilities ……………………………. HKD 40,323 HKD 33,956
Retirement Benefit Obligations ………….. 268 170
Total Liabilities ………………………………….. 75,666 66,709
Shareholders’ Equity:
Terminology (differences from account names reported by Cathay Pacific).
aLiquid Funds.
bStock.
gFunds Attributable to Cathay Pacific Shareholders.
Solutions 3-30
3.30 (Infosys Technologies Limited; balance sheet format.)
a. Infosys Technologies Limited, U.S. GAAP formatted balance sheet.
INFOSYS TECHNOLOGIES LIMITED
Balance Sheet
(In Millions of Rs. Crore)
March 31,
2008 2007
Assets
Current Assets:
Cash and Cash Equivalents ………………………………. Rs 6,429 Rs 5,470
Liabilities and Shareholders’ Equity
Current Liabilities ……………………………………………………. Rs 1,483 Rs 1,162
3-31 Solutions
3.30 continued.
b. Infosys Technologies Limited, IFRS formatted balance sheet.
INFOSYS TECHNOLOGIES LIMITED
Balance Sheet
(In Millions of Rs. Crore)
March 31,
2008 2007
Assets
Noncurrent Assets:
Current Assets:
Liabilities and Shareholders’ Equity
Provisions ………………………………………………………………… Rs 2,248 Rs 662
Solutions 3-32
3.31 (Ericsson; balance sheet format, terminology, and accounting methods.)
ERICCSON
U.S. GAAP Balance Sheet
For the Year Ended December 31, 2007
(Amounts in SEK Millions)
Assets
Current Assets:
Cash and Cash Equivalents ……………………………………………………… SEK 28,310
Short-Term Investments ………………………………………………………….. 29,406
Trade Receivables …………………………………………………………………….. 60,492
Noncurrent Assets:
Equity in Joint Ventures …………………………………………………………… SEK 10,903
Liabilities and Shareholders’ Equity
Current Liabilities:
Trade Payables ………………………………………………………………………….. SEK 17,427
3-33 Solutions
Total Noncurrent Liabilities……………………………………………….. SEK 32,389
Total Liabilities …………………………………………………………………….. SEK 109,565
Solutions 3-34
3.31 continued.
1. U.S. GAAP does not permit the capitalization of development costs.
2. U.S. GAAP does not permit the upward revaluation of land. In 2007, this
3. Both U.S. GAAP and IFRS require assessments for impairment of
4. From the information provided, the probability of loss is 60% for the
Summary Calculations for Shareholders’ Equity:
Balance per Ericsson Balance Sheet, 2007 (IFRS) …………… SEK 134,112
3-35 Solutions
Solutions 3-36
3.32 (Texas Steakhouse; interpreting balance sheet changes.)
a. The principal assets of a restaurant are property, plant and equipment.
These assets comprise two-thirds of the assets of Texas Steakhouse.
b. The common-size percentage for cash increased significantly between
2007 and 2008 and the common-size percentage for other assets
c. The percentages in the common-size balance sheet are not independent
3-37 Solutions
3.33 (Cemex; common-size balance sheet and interpreting balance sheet changes.)
a. The common size balance sheet for Cemex for years 2007 and 2006 are
shown below.
2007 2006
Assets
Current Assets:
rent Accounts Receivable ……… 10,960 2.0% 9,966 2.8%
Liabilities and Shareholders’
Equity:
Current Liabilities: