Keano Limited adopted an accounting policy of capitalizing development expenditure and amortizing it to the Statement of Comprehensive Income over 4 years. During 2004 the Directors decided that for 2004 and future years all development expenditure should be written off as incurred. This decision has not resulted from any change in the expected outcome of projects on hand, but rather from a desire to give a fairer presentation of results and financial position.
Movements on Development Expenditure Account: 

The retained earnings for the year ended 31 December 2004 were €1,820. This was arrived at after charging development expenditure of €500.
Requirement Show how the change in accounting policy would be reflected in the financial statements of Keano Limited.

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Year 2001 2002 2003 2004 Expenditure Incurred '000 The 2003 financial statements showed: 400 600 300 500 Amortised to Statement of Comprehensive Income '000 Retained earnings 1 January 2003 2,860 Retained earnings for the year 1,580 Retained earnings 31 December 2003 4,440 '000 100 250 325 500