Abacab Company's shares are shown on the New Market Stock Exchange, which gives the use of either international financial reporting standards (IFRS) or U.S. GAAP. On 1^st Jan, Year 1, Abacab Company acquired a building at a cost of $10 million. The building has a 20-yr. useful life and no remaining value and is depreciated on a straight-line basis. On 1^st January, Year 3, the company hired an appraiser who evaluates the fair value of the building (net of any accumulated depreciation) to be $12 million.

IAS16, "Property, equipment and plant," needs assets to be initially measured at cost. Following to initial recognition, assets will be carried either at cost less accumulated depreciation and any impairment losses (the cost model) or at a revalued amount equivalent to fair value at the date of the revaluation less any following accumulated depreciation and impairment losses (the revaluation model). If a firm selects to use the revaluation model, the counterpart to the revaluation of the asset is recorded as an increase in Accumulated Other Comprehensive Income (stockholders' equity). Following depreciation is based on the revalued amount less any residual value.

(U.S.GAAP) needed items of property, equipment and plant to be initially measured at cost. U.S.GAAP does not allow property, equipment and plant to be revalued above original cost at following balance sheet dates. The cost of property, equipment and plant must be depreciated on a systematic basis over its useful life. Following to initial recognition, assets must be carried at cost less accumulated depreciation and any impairment loss.

a) Evaluate the amount of depreciation expense recognized in Year 2, Year 3, and Year 4 under (a) the revaluation model of IAS 16 and (b) U.S. GAAP.

b) Evaluate the book value of the building under the two different sets of accounting rules at 2^nd January, Year 3; 31^st December, Year 3; and 31^st December, Year 4.

C) Summarize the difference in net income and in stockholders' equity over the 20-year life of the building using the 2 different sets of accounting rules.