Llungby AB spent 1,000,000 krone in 2020 on the development of a new product. The company determined
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Llungby AB spent 1,000,000 krone in 2020 on the development of a new product. The company determined that 25 percent of this amount was incurred after the criteria in IAS 36 for capitalization as an intangible asset had been met. The newly developed product is brought to market in January 2021 and is expected to generate sales revenue for five years.
a. Determine the appropriate accounting for development costs for the years ending December 31, 2020, and December 31, 2021, under (1) IFRS and (2) U.S. GAAP.
b. Prepare the entry(ies) that the U.S. parent would make on the December 31, 2020, and December 31, 2021, conversion worksheets to convert IFRS balances to U.S. GAAP.
Assume that a foreign company using IFRS is owned by a company using U.S. GAAP. Thus, IFRS balances must be converted to U.S. GAAP to prepare consolidated financial statements.
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Under IFRS 250000 1000000 x 25 of development costs incurred in 2020 are capitalized as a finitelived intangible asset However amortization does not b...View the full answer
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