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ACC 680 Module Three Homework
ACC 680 Module Three Homework
ACC 680 Module Three Homework
Required:
1. What percentage of R&D expenditures was capitalized during the fiscal year ending March 31,
2017? How does this percentage compare with the capitalization ratios of the German
automakers profiled in Exhibit 4.4?
2. Estimate the average useful life of product development costs by dividing average capitalized
product development costs by the amortization expense for fiscal 2016-2017. Compute average
capitalized product development costs as simple average balances at the beginning and end of
each fiscal year. Does your estimate fall within the range of the useful lives for development
costs disclosed in the accounting policy footnote?
3. The table below contains metrics as reported in JLR’s three primary financial statements. Convert
these metrics to a US GAAP basis. Where necessary assume that JLR’s tax rate is 21.1 percent, a
rate disclosed in Footnote 14, Taxation.
Answers:
1. Jaguar has about a 200% average in which was capitalized related to R&D expenditures. Jaguar
was able to capitalize more of their total expense than German companies.
PBT:
IFRS Amount – Amount Capitalized + Amortization Expense
U.S. GAAP Basis = $1,610 – 1,426 + 769 = $953
Net:
PBT X (1 – Tax Rate)
U.S. GAAP Basis = $953 X (1 – 0.211) = $751.92
U.S. GAAP Basis = $953 X (0.789) = $751.92 ≈ $752
Total Assets:
IFRS Amount – Amount Capitalized
U.S. GAAP Basis = $10,962 – 1,426 = $9,536
Shareholders’ Equity:
IFRS Amount – Net BV on March 31, 2017
U.S. GAAP Basis = $6,581 – 2,156 – 2,930 = $1,495
Oper. Cashflow:
IFRS Amount – Amount Capitalized
U.S. GAAP Basis = $3,160 – 1,426 = $1,734
Cap. Expenditures:
IFRS Amount – Amount Capitalized
U.S. GAAP Basis = $3,056 – 1,426 = $1,630