Pharma plc, engaged in the production of pharmaceutical drugs, has been contracted by the World Health Organisation
Question:
Pharma plc, engaged in the production of pharmaceutical drugs, has been contracted by the World Health Organisation (WHO) to search for an immediate remedy for the common cold. Under this contract WHO will reimburse Pharma the full cost incurred by them on research as well as development of the drug, irrespective of its success. During the year ended 30 June 2012, Pharma has incurred £348,000 on this effort with very limited success.
Required:
Explain how this cost should be treated when Pharma plc prepares its financial statements for the year ended 30 June 2012.
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Step by Step Answer:
The treatment of costs related to research and development RD activities in financial statements follows specific accounting guidelines which are typi...View the full answer
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Related Book For 
Financial Accounting An Introduction
ISBN: 9780273737650
2nd Edition
Authors: Mr Barry Elliott, Mr Augustine Benedict
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