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Abacab Company's shares are listed on the New Market StockExchange, which allows the use of either international financialreporting standards (IFRS) or U.S. GAAP. On Jan 1, Year 1, AbacabCompany acquired a building at a cost of $10 million. The buildinghas a 20-yr. useful life and no residual value and is depreciatedon a straight-line basis. On January 1, Year 3, the company hiredan appraiser who determines the fair value of the building (net ofany accumulated depreciation) to be $12 million.

IAS16, "Property, plant, and equipment," requires assets to beinitially measured at cost. Subsequent to initial recognition,assets may be carried either at cost less accumulated depreciationand any impairment losses (the cost model) or at a revalued amountequal to fair value at the date of the revaluation less anysubsequent accumulated depreciation and impairment losses (therevaluation model). If a firm chooses to use the revaluation model,the counterpart to the revaluation of the asset is recorded as anincrease in Accumulated Other Comprehensive Income (stockholders'equity). Subsequent depreciation is based on the revalued amountless any residual value.
(U.S.GAAP) required items of property, plant, and equipment to beinitially measured at cost. U.S.GAAP does not allow property,plant, and equipment to be revalued above original cost atsubsequent balance sheet dates. The cost of property, plant, andequipment must be depreciated on a systematic basis over its usefullife. Subsequent to initial recognition, assets must be carried atcost less accumulated depreciation and any impairment loss.

a) Determine the amount of depreciation expense recognized in Year2, Year 3, and Year 4 under (a) the revaluation model of IAS 16 and(b) U.S. GAAP.
b) Determine the book value of the building under the two differentsets of accounting rules at January 2, Year 3; December 31, Year 3;and December 31, Year 4.
C) summarize the difference in net income and in stockholders’equity over the 20-year life of the building using the 2 differentsets of accountingrules.