During the 2021–22 period, Stitches Ltd acquired two patents, as well as incurring expenses in relation to the development of a new process that it expects to patent for subsequent use.

1. Patent XC456 was acquired from a leather manufacturing firm on 1 October 2021 for $425 000. Given the continued demand for men's leather shoes it is expected that the life of this patent is indefinite.
2. Patent CU254 was obtained as part of the business acquired from the conglomerate U‐Beaut Fashions. The business was acquired on 1 January 2022 for $5 200 000. Patent CU254 was considered to have a fair value of $400 000 at the acquisition date. The patent was considered to have a 10‐year life with benefits to be received evenly over this period.
3. Stitches Ltd continued to incur expenses in relation to the development of a new process for softening leather, which it expects to patent for subsequent use. Expenses incurred were:

1 September 2021	$50 000
10 November 2021	$35 000
2 May 2022	$52 000

4. Following the work done up to 31 December 2021, Stitches Ltd believed that the project had progressed from the research stage to the development stage as it was now technically feasible to soften the leather as required. Stitches Ltd expected to continue with the project, as it considered that the company would be able to use the project results in its manufacturing process when the project was completed.

Required

Prepare a detailed report on which accounting standard would apply and the principles of how to account for patents. Explain the appropriate accounting procedures for the examples above