Question

Sheffield Corporation, a clothing retailer, had income from operations (before tax) of $427,500, and recorded the following before-tax gains/(losses) for the year ended December 31, 2020:

Gain on disposal of equipment		30,780
Unrealized (loss)/gain on FV-NI investments		(61,560	)
(Loss)/gain on disposal of building		(77,520	)
Gain on disposal of FV-NI investments		37,620

Sheffield also had the following account balances as at January 1, 2020:

Retained earnings		$467,400
Accumulated other comprehensive income (this was due to a revaluation surplus on land)		104,240
Accumulated other comprehensive income (this was due to gains on FV-OCI investments)		62,700

As at January 1, 2020, Sheffield had one piece of land that had an original cost of $142,000 that it accounted for using the revaluation model. It was most recently revalued to fair value on December 31, 2019, when its carrying amount was adjusted to fair value of $246,240. In January 2020, the piece of land was sold for proceeds of $246,240. In applying the revaluation model, Sheffield maintains the balance in the Revaluation Surplus (OCI) account until the asset is retired or disposed of.

In 2015, Sheffield purchased a portfolio of debt investments that the company intended to hold for longer term and classified the portfolio of investments as fair value through other comprehensive income (FV-OCI) with gains/losses recycled through net income. The investments in the portfolio are traded in an active market. Sheffield records unrealized gains and losses on these investments as OCI, and then books these gains and losses to net income when they are impaired or sold. The portfolio’s carrying amount on December 31, 2019, was $125,400. The entire portfolio was sold in November 2020 for proceeds of $143,640.

Sheffield’s income tax expense for 2020 was $112,860. Sheffield prepares financial statements in accordance with IFRS.

Calculate net income for the year ended December 31, 2020.

Calculate retained earnings as at December 31, 2020.

Calculate net income for the year ended December 31, 2020, if Sheffield prepares financial statements in accordance with ASPE. Sheffield’s income tax expense would not change.

Calculate retained earnings as at December 31, 2020, if Sheffield prepares financial statements in accordance with ASPE. Assume that under ASPE, Sheffield’s retained earnings at January 1, 2020, would be $530,100.

Will the sum of the Accumulated Other Comprehensive Income and Retained Earnings under IFRS equal the balance of Retained Earnings under ASPE at December 31, 2020? Prepare a continuity schedule of the related accounts to demonstrate your answer.

The sum of the AOCI and Retained Earnings under IFRS equal the balance of Retained Earnings under ASPE as follows:

Answer 1

Calculation of Net Income for the year ended 31st December 2020 as per IFRS
Statement of Comprehensive Income for the year ended 31st December 2020
Particulars	Amount ($)	Amount ($)
Profit or Loss
Income from Operations		4,27,500
Gain on disposal of equipment	30,780
Unrealized loss on FV-NI Investments	-61,560
Loss on disposal of building	-77,520
Gain on Disposal of FV-NI Investments	37,620	-70,680
Profit Before Tax		3,56,820
Tax Expense		-1,12,860
Profit After tax		2,43,960
Revaluation Surplus from Last Year OCI Account		1,04,240
(246420-142000)
Transfer from OCI to Net Income on Sale of Porfolio		18,240
(143640-125400)
Total Net Income		3,66,440
Calculation of Retained earnings as at 31st December 2020 as per IFRS
Particulars	Amount ($)	Amount ($)
Retained earnings as at 1st January 2020		4,67,400
Net Income as per OCI Statement		3,66,440
Total		8,33,840
OCI (Revaluation Surplus on Land) as at 1st January 2020	1,04,240
Less: Transfer to Net Income	-1,04,240	-
OCI (Gains on FV-OCI Investments) as at 1st January 2020	62,700
Less: Transfer to Net Income	-18,240	44,460
Total Retained earnings as at 31st December 2020		8,78,300
Calculation of Net Income for the year ended 31st December 2020 as per ASPE
Statement of Net Income for the year ended 31st December 2020
Particulars	Amount ($)	Amount ($)
Revenue Recognized		4,27,500
Gain on disposal of equipment		30,780
Unrealized loss on FV-NI Investments		-61,560
Loss on disposal of building		-77,520
Gain on Disposal of FV-NI Investments		37,620
Net Income Before Tax		3,56,820
Tax Expense		-1,12,860
Total Net Income after Tax		2,43,960