During the year, the company made the following research and development expendi
ID: 2456977 • Letter: D
Question
During the year, the company made the following research and development expenditures: Compute the total research and development (R&D;) expense for the year assuming the expenditures were for normal R&D.; Compute the total research and development (R&D;) expense for the year assuming the expenditures were for software R&D.; Compute the total research and development (R&D;) expense for the year assuming the expenditures were for normal R&D; and the company does its accounting according to International Financial Reporting Standards.Explanation / Answer
Answer for question no.1:
In case the expenditure incurred is for normal R&D, then the same is expensed in the period in which it is incurred. Therefore, the research and development expenditure incurred during the year $100,000+$120,000 =$220,000 is entirely recognised as research and development expense.
Answer for question no.2:
Expenditure expensed before technical feasibility is recorded as normal expenditure and the research and development expenses, expended after technical feasibility becomes apparent is capitalized as an asset.
Hence, reseach and development expense for the year is $100,000 and the balance $120,000 is capitalized as an asset.
Answer for question no.3:
Under IFRS, if the research and development expenses incurred are in the nature of normal R&D, expenditure incurred before establishing technical feasibility are to be treated as expenses for the period and the expenses incurred after establishing technical feasibility are capitalized to the asset account. Hence, the research and development expense for the period is $100,000.
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