In the footnotes to the IFRS-based 2014 financial statements of European Aeronautical Defense and Space Company (EADS),
Question:
In the footnotes to the IFRS-based 2014 financial statements of European Aeronautical Defense and Space Company (EADS), parent company for Airbus, research and development (R&D) expenses were reported at 3,391 million euros. Also included in the footnotes is a chart describing the activity during 2014 in an intangible asset account called “capitalized development costs,” which shows the following (in million euros):
Beginning balance ...............2,280
Increases .................................252
Amortization ...........................(25)
Ending balance ....................2,507
REQUIRED:
a. Explain the nature of the account called “capitalized development costs,” and how EADS is accounting for R&D.
b. How would this account be treated if EADS followed U.S. GAAP?
c. Estimate the amount of R&D expense EADS would have recognized during 2014 if it had followed U.S. GAAP.
d. Estimate the overall effect on 2014 net income of using IFRS vs. U.S. GAAP to account for R&D costs.
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... GAAP
Generally Accepted Accounting Principles (GAAP) is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC). While the SEC previously stated that it intends to move from U.S. GAAP to the International Financial Reporting Standards (IFRS), the...
Step by Step Answer:
a EADS is expensing a portion of its research and development costs but the co...View the full answer
