CRITICAL THINKING QUESTION

Required

Genetic Technologies Ltd (ASX Code: GTG) with a market capitalization of AUD $24.4 million as at 22 February 2017 is a biological research company that is developing gene technology in the hope of finding a vaccine for hay fever. During the current financial year, Genetic Technologies Ltd spent $2.4 million on research. You work as entry accounting graduate for the financial controller at Genetic Technologies. The CEO approaches the financial controller to discuss the profit implications of the research expenditure. The financial controller suggests that you prepare a brief to the CEO. The CEO provides you with the following additional information:

Chief scientist report: This report outlines the progress made on the project. The report indicates that the project is currently in the lab testing phase and that the project team has the required technology to complete the project. The chief scientist concludes the report by stating that the project is close to completion.

Report by the director of marketing and distribution: The report outlines a plan for using Genetic Technologies existing distribution network to market the vaccine.

Required

Using the AREA framework, prepare a summary of relevant facts and an evaluation of the profit implications. Discuss your findings in class to develop a brief for the CEO within your teams (adapted from Hoggett et al. 2015, Financial Accounting, 9^th edition, p. 675).

ANALYSE: (30-50 words)

Identify the issue and why it matters. Determine what you need to find out.

RESEARCH: (200-250 words)

Gather relevant facts and evidence, sort all evidence, identify themes or issues and develop a data scaffold. Sort all evidence and weigh it up to start building a picture of your Answer.

EVALUATE & ANSWER: (200-250 words)

Provide your opinion of the themes or issues you have identified, justified by the evidence you have gathered and evaluated.