Case 4-1

Jaguar Land Rover PLC

Jaguar Land Rover Automotive PLC (JLR) is a maker of luxury autos based in Coventry, United Kingdom. JLR uses IFRS and has a fiscal year-end of March 31. You have been asked to use your knowledge of IFRS to convert key metrics for the company to a U.S. GAAP basis. For simplicity, you may assume that the only material differences between JLRs as-reported numbers and those it would report under U.S. GAAP are traceable to its policy of capitalizing development costs.

Internally Generated Intangible Assets (from Footnote 2, Accounting Policies)

Research costs are charged to the consolidated income statement in the year in which they are incurred.

Product development costs incurred on new vehicle platforms, engines, transmission and new products are recognised as intangible assetswhen feasibility has been established, the Group has committed technical, financial and other resources to complete the development and it is probable that the asset will generate future economic benefits.

The costs capitalised include the cost of materials, direct labour and directly attributable overhead expenditure incurred up to the date the asset is available for use.

Interest cost incurred is capitalised up to the date the asset is ready for its intended use, based on borrowings incurred specifically for financing the asset or the weighted average rate of all other borrowings, if no specific borrowings have been incurred for the asset.

Product development cost is amortised over a period of between two and ten years.

Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated impairment loss, if any.

Amortisation is not recorded on product development in progress until development is complete.

Research and Development (from Footnote 11)

Year ended 31 March	2017 ( millions)
Total research and development costs incurred	1,794
Research and development expensed	(368)
Development costs capitalized	1,426

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Intangible Assets (selections from Footnote 18)

Cost	Product Development in Progress ( millions)	Capitalized Product Development ( millions)
Balance at 31 March 2016	1,539	4,525
Additionsinternally developed	1,426
Transfers	(809)	809
Disposals		(138)
Balance at 31 March 2017	2,156	5,196
Amortization
Balance at 31 March 2016		1,635
Amortization for the year		769
Disposals		(138)
Balance at 31 March 2017		2,266
Net book value at 31 March 2017	2,156	2,930

Required:

Identification of the principal problem addressed in the case;

Analysis of relevant information bearing on the problem;

discussion of alternative courses of action in resolving the problem;

Alternative course of action of decision by the team in resolving the problem and

Reasons for the decision.