Services Ltd acquired research and development costs of $10 million on a project to develop product A in 2018. The research phase can be clearly distinguished from the development phase of the project. Total costs in the research phase are $6 million, and in the development phase total costs are $4 million. All of the IAS 38 criteria have been met for recognition of the development costs as an asset. Product A was brought to market in Year 2019 and is expected to be marketable for five years. Total sales of Product A are estimated at more than $100 million. Required: Determine the impact research and development costs have on Services Ltd in 2018 and 2019 income under (1) IFRS and (2) U.S. GAAP
Services Ltd acquired research and development costs of $10 million on a project to develop product A in 2018. The research phase can be clearly distinguished from the development phase of the project. Total costs in the research phase are $6 million, and in the development phase total costs are $4 million. All of the IAS 38 criteria have been met for recognition of the development costs as an asset. Product A was brought to market in Year 2019 and is expected to be marketable for five years. Total sales of Product A are estimated at more than $100 million. Required: Determine the impact research and development costs have on Services Ltd in 2018 and 2019 income under (1) IFRS and (2) U.S. GAAP
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Services Ltd acquired research and development costs of $10 million on a project to develop product A in 2018. The research phase can be clearly distinguished from the development phase of the project. Total costs in the research phase are $6 million, and in the development phase total costs are $4 million. All of the IAS 38 criteria have been met for recognition of the development costs as an asset. Product A was brought to market in Year 2019 and is expected to be marketable for five years. Total sales of Product A are estimated at more than $100 million.
Required:
- Determine the impact research and development costs have on Services Ltd in 2018 and 2019 income under (1) IFRS and (2) U.S. GAAP
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