The Following Financial Information Is Available for Paul Company, a Hypothetical

question 49

Essay

The following financial information is available for Paul Company, a hypothetical non-U.S. firm with shares listed on a U.S. stock exchange:

If Paul were following U.S. GAAP, development costs would be expensed when incurred.
According to U.S. GAAP, the possible obligation for severance benefits would not be recognized until it had become probable.
Prepare a reconciliation of Paul's reported stockholders' equity and net income to the amounts of these items under U.S. GAAP.

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Definitions:

Output Standards

Benchmarks set to measure the quantity, quality, or performance of a product or service produced.

Inferior Good

A type of good for which demand decreases as the income of consumers increases, opposite to a normal good.

Demand

The quantity of a product or service that consumers are willing and able to purchase at various prices over a given period of time.

Income

Payments received, on an ongoing basis, as a result of employment or investment yields.