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SUMMER 2023: FIN305 FINANCIAL REPORTING

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FIN305(SS23)

3.0: Mr Najay Murray - Section ONL-B

Discussion Question 2 (CLO 2)

Discussion Question 2

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Discussion Question 2 (CLO 2)

Discussion Question 2

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Discussion Question 2

by Najay Murray - Friday, 7 July 2023, 3:38 PM

Number of replies: 8

Discussion Question 2

An entity has incurred the following expenditure during the current year:

a) $100,000 spent on the design of a new product it is anticipated that this design will be taken forward over the next two year period to be developed and tested with a view to production in three years time.

b) $500,000 spent on the testing of a new production system which has been designed internally and which will be in operation during the following accounting year. This new system should reduce the costs of production by 20%.

According to IAS 38, how should each of these costs be treated in the financial

statements of the entity?