Case 5--.41

S. A. Harrington Company

S. A, Harrington Company is a US-based company that prepares its cons() dated financial statements in accordance With U.S. GAAP. The company report income in 2015 of $5,000.00 and stockholders' equity at December 31, 2015 of $40,000,000.

'The CFO of S. A. Harrington has learned that the U.S. Securities and Exchange Commission is considering requiring U.S. companies to use 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 U.S. GAAP to IFRS. You have identified the following five areas in which S. A. Harrington's accounting principles based on U.S. GAAP differ from MRS.

1. Restructuring
2. Pension plan
3. Stock options
4. Revenue recognition
5. Bonds payable

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

Restructuring Provision

The company publicly announced a restructuring plan in 2015 that created a valid expectation on the part of the employees to be terminated that the company will carry out the restructuring. The company estimated that the restructuring would cost $300,000. No legal obligation to restructure exists as of December 31, 2015.

Stock options

Stock options were granted to key officers on January 1, 2015. The grant date fair value per option was $10, and a total of 9,000 options were granted. The options vest in equal installments over three years: one-third vest in 2014, one-third in 2015, and one-third in 2016. The company uses a straight-line method to recognize Compensation expense related to stock options.

Revenue Recognition

The company entered into a contract in 2015 to provide engineering services to long-term Customer over a 12-month period. The fixed price is $250,000, complete at the end of the company estimates with a high degree of reliability that the project is 30 percent complete at the end of 2015.

Required:

Prepare a reconciliation schedule to reconcile 2015 net income and December 31, 2015, stockholders' equity from a U.S. GAAP basis to IFRS. Ignore income taxes. Prepare a note to explain each adjustment made in the reconciliation schedual.