Ferrari disclosed the following concerning research and development in their 2017 annual report: Development costs for car project production and related components, engines and systems are recognized as an asset if, and only if, both of the following conditions under IAS 38—Intangible Assets are met: that development costs can be measured reliably and that the technical feasibility of the product, volumes and pricing support the view that the development expenditure will generate future economic benefits. Capitalized development costs include all direct and indirect costs that may be directly attributed to the development process.

Capitalized development costs are amortized on a straight-line basis from the start of production over the estimated lifecycle of the model and the useful life of the components (generally between four and eight years). All other research and development costs are expensed as incurred. In particular, the Group incurs significant research and development costs through the Formula 1 racing activities. These costs are considered fundamental to the development of the sports and street car models and prototypes. The model for the Formula 1 racing activities continually evolves and as such these costs are expensed as incurred.

For the year ended December 31, 2017, the Group capitalized development costs of €185,115 thousand (€141,396 thousand for the year ended December 31, 2016). On the consolidated income statement, profit before taxes was €746,416 in 2017 and €567,353 in 2016. Amortized development costs were €100,502 in 2017 and €104,055 in 2016.

Required:

A. What are the standards for R&D under IFRS and US GAAP?

B. What would be different if Ferrari used U.S. GAAP to account for R&D (i.e., what would be the impact on pretax income?)?