1) Under GAAP, when a company installs safety and/or environmental devices in excess of what the law mandates, it is treated as part of the asset. However; under IFRS these additional expenditures must be expensed immediately. Which method do you prefer? Explain your answer. Also, discuss the implications on the balance sheet and income statement for the year of expenditure and subsequent years of the two methods.
2) An American Company borrowed 1million Canadian dollars to finance the construction of an office building when the Canadian dollar was worth $1 US. At 10% interest, the American Company expected to pay back 1.1 million Canadian dollars which would cost $1.1 million US dollars. Unfortunately, based on changes in the value of the Canadian dollar, the American Company must pay $1.3 million US dollars to satisfy this debt. How will this $200,000 US dollar difference be shown on the American Company's financial statements under GAAP? How would this have been shown if the American Company used IFRS? Which gives us more relevant information? Explain.
3) Component depreciation is allowed under GAAP but is rarely used. Under IFRS it is required. Should component depreciation be required or allowed or prohibited? Defend your answer and remember, it is allowed under GAAP but rarely used.