8. Explain the accounting treatment on the research and development activities for the year ended 31 December 2021 based on MFRS 138 Intangible Assets. (6 marks)

AgroLeisure Bhd had involved in agricultural activities since late 1990 s. The principal activity of AgroLeisure Bhd was growing Malaysian tropical fruits. The harvested fruits would be sold to several distributor companies throughout the country. To attract domestic and international visitors to its plantation, AgroLeisure Bhd also involved in agritourism activities. AgroLeisure Bhd had invested into ten village-styled chalets in 2020 costing RM50,000 each. The chalets were rented out to interested visitors. The fair value of the chalets at 31 December 2020 and 31 December 2021 were RM600,000 and RM660,000 respectively. In January 2021, AgroLeisure Bhd acquired a piece of land at a fair value of RM3,000,000 nearby its plantation field. The acquisition was financed by issuing 3,000,000 ordinary shares at RM1 each. The cost of demolishing old building on the land was RM550,000 and the waste materials were sold for RM 150,000 . The payment on demolition cost was settled by cheque. Currently, AgroLeisure Bhd had not decided on the use of the land. The fair value of the land at 31 December 2021 was RM3,600,000. At 1 April 2021, AgroLeisure Bhd acquired a special equipment from Australia to restore the fruits' freshness. The equipment was acquired at an invoice price of AUD1 million with a useful life of 10 years. AgroLeisure Bhd paid 20% of the invoice price on the acquisition date. The exchange rates were provided as follows: To encourage more visitors, AgroLeisure Bhd decided to construct a building that consisted of seminar halls, ballrooms and rooms to be rented out. The cost of the building was estimated to be RM1,800,000. To finance the construction, AgroLeisure Bhd had applied for RM2,000,000 three-year term loan from a bank on 15 March 2021 to finance the construction of the building. On 3 May 2021, the bank approved RM1,500,000 loan which carried an interest rate of 5% per annum. The construction was started on 1 June 2021 and expected to complete in August 2022. On 1 July 2021, AgroLeisure Bhd invested a quarter of the loan amount in a 6-month fixed deposit in Ar Rahaj Bank earning a return of 3% per annum. Due to shortage of construction materials, the construction activities were temporarily stopped in October 2021. To overcome the problem of unsold fruits, AgroLeisure Bhd decided to purchase a plant to produce canned fruits and fruit jam. The cost of the plant was RM1,000,000 and AgroLeisure Bhd intended to use the plant for 5 years. To ease the financial constraint, AgroLeisure Bhd had applied for a grant from the state government since AgroLeisure Bhd was eligible to the grant with the condition that AgroLeisure Bhd was actively involved in agricultural activities. On 15 July 2021, the state government had awarded the grant amounted to RM300,000 in relation to the plant's acquisition. AgroLeisure Bhd received the plant and grant on 1 August 2021. During 2021, AgroLeisure Bhd had developed its customer list and incurred RM200,000. It also acquired a customer list for RM150,000 on 1 October 2021. AgroLeisure Bhd had capitalised the customer lists in its statement of financial position. The customer lists were anticipated to give benefit to AgroLeisure Bhd for 2 years. AgroLeisure Bhd has also incurred RM2,500,000 on research and development activities in developing organic Udang Merah durian saplings to be sold for domestic and international market. 30% of the cost incurred was related to research phase. The management was confident that this project would be successful as demand for organic Udang Merah durian saplings was overwhelming. AgroLeisure Bhd anticipated that it would have this advantage for three years after the project was expected to be completed in 2022 . AgroLeisure Bhd assessed that the estimated revenue for the saplings would be RM2,300,000 and the estimated directly attributable cost was RM600,000. The research and development cost; and the amortisation of intangible assets had not been considered in the financial statement of AgroLeisure Bhd. AgroLeisure Bhd had involved in agricultural activities since late 1990 s. The principal activity of AgroLeisure Bhd was growing Malaysian tropical fruits. The harvested fruits would be sold to several distributor companies throughout the country. To attract domestic and international visitors to its plantation, AgroLeisure Bhd also involved in agritourism activities. AgroLeisure Bhd had invested into ten village-styled chalets in 2020 costing RM50,000 each. The chalets were rented out to interested visitors. The fair value of the chalets at 31 December 2020 and 31 December 2021 were RM600,000 and RM660,000 respectively. In January 2021, AgroLeisure Bhd acquired a piece of land at a fair value of RM3,000,000 nearby its plantation field. The acquisition was financed by issuing 3,000,000 ordinary shares at RM1 each. The cost of demolishing old building on the land was RM550,000 and the waste materials were sold for RM 150,000 . The payment on demolition cost was settled by cheque. Currently, AgroLeisure Bhd had not decided on the use of the land. The fair value of the land at 31 December 2021 was RM3,600,000. At 1 April 2021, AgroLeisure Bhd acquired a special equipment from Australia to restore the fruits' freshness. The equipment was acquired at an invoice price of AUD1 million with a useful life of 10 years. AgroLeisure Bhd paid 20% of the invoice price on the acquisition date. The exchange rates were provided as follows: To encourage more visitors, AgroLeisure Bhd decided to construct a building that consisted of seminar halls, ballrooms and rooms to be rented out. The cost of the building was estimated to be RM1,800,000. To finance the construction, AgroLeisure Bhd had applied for RM2,000,000 three-year term loan from a bank on 15 March 2021 to finance the construction of the building. On 3 May 2021, the bank approved RM1,500,000 loan which carried an interest rate of 5% per annum. The construction was started on 1 June 2021 and expected to complete in August 2022. On 1 July 2021, AgroLeisure Bhd invested a quarter of the loan amount in a 6-month fixed deposit in Ar Rahaj Bank earning a return of 3% per annum. Due to shortage of construction materials, the construction activities were temporarily stopped in October 2021. To overcome the problem of unsold fruits, AgroLeisure Bhd decided to purchase a plant to produce canned fruits and fruit jam. The cost of the plant was RM1,000,000 and AgroLeisure Bhd intended to use the plant for 5 years. To ease the financial constraint, AgroLeisure Bhd had applied for a grant from the state government since AgroLeisure Bhd was eligible to the grant with the condition that AgroLeisure Bhd was actively involved in agricultural activities. On 15 July 2021, the state government had awarded the grant amounted to RM300,000 in relation to the plant's acquisition. AgroLeisure Bhd received the plant and grant on 1 August 2021. During 2021, AgroLeisure Bhd had developed its customer list and incurred RM200,000. It also acquired a customer list for RM150,000 on 1 October 2021. AgroLeisure Bhd had capitalised the customer lists in its statement of financial position. The customer lists were anticipated to give benefit to AgroLeisure Bhd for 2 years. AgroLeisure Bhd has also incurred RM2,500,000 on research and development activities in developing organic Udang Merah durian saplings to be sold for domestic and international market. 30% of the cost incurred was related to research phase. The management was confident that this project would be successful as demand for organic Udang Merah durian saplings was overwhelming. AgroLeisure Bhd anticipated that it would have this advantage for three years after the project was expected to be completed in 2022 . AgroLeisure Bhd assessed that the estimated revenue for the saplings would be RM2,300,000 and the estimated directly attributable cost was RM600,000. The research and development cost; and the amortisation of intangible assets had not been considered in the financial statement of AgroLeisure Bhd