Discussion Question 2 An entity has incurred the following expenditure during the current year: a) $100,000 spent on the design of a new product it is anticipated that this design will be taken i forward over the next two-year period to be developed and tested with a view to production in three years-time, b) $500,000 spent on the testing of a new production system which has been designed internally and which will be in operation during the following accounting year. This new system should reduce the costs of production by 20%. According to A5 18. how should each of these costs be treated in the financial statements of the entity?
Discussion Question 2 An entity has incurred the following expenditure during the current year: a) $100,000 spent on the design of a new product it is anticipated that this design will be taken i forward over the next two-year period to be developed and tested with a view to production in three years-time, b) $500,000 spent on the testing of a new production system which has been designed internally and which will be in operation during the following accounting year. This new system should reduce the costs of production by 20%. According to A5 18. how should each of these costs be treated in the financial statements of the entity?
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Discussion Question 2
An entity has incurred the following expenditure during the current year:
a) $100,000 spent on the design of a new product it is anticipated that this design will be taken
forward over the next two-year period to be developed and tested with a view to production in three
years-time.
b) $500,000 spent on the testing of a new production system which has been designed internally and
which will be in operation during the following accounting year. This new system should reduce the
costs of production by 20%.
According to IAS 38, how should each of these costs be treated in the financial
statements of the entity?
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