Problem
Case: SKD Limited
With respect to the adjustments related to goodwill, answer the following:
1. Why does the adjustment for goodwill amortization increase net income under Country A GAAP but decrease net income under Country B GAAP?
2. Why does the goodwill adjustment increase stockholders' equity in Country A but decrease stockholders' equity in Country B?
3. Why are the adjustments to stockholders' equity larger than the adjustments to income?
4. With respect to the adjustments made by the analyst in Country A related to interest, answer the following:
5. Why are there two separate adjustments to income related to interest?
6. Why does the adjustment to income for capitalized interest increase income, whereas the adjustment for depreciation related to capitalized interest decreases income?
7. Why is the positive adjustment to stockholders' equity for capitalized interest smaller than the positive adjustment to income for capitalized interest?
8. With respect to the adjustments made by the analyst in Country B related to property, plant, and equipment, answer the following:
9. Why does the adjustment for depreciation related to revalued property, plant, and equipment decrease income, whereas the adjustment for revaluation of property, plant, and equipment increases stockholders' equity?