During the course of a year, Happy Ltd incurred expenditure on many research and development activities. Details of two of them are given below. Project AY To develop a new compound in view of the anticipated shortage of raw material currently being used in one of the company’s processes. Sufficient progress has been made to suggest that new compounds can be produced at a cost comparable to that of the existing raw material. A project BY To improve the yield of an important manufacturing operation of the company. At present material input with a cost of RM 100,000 p.a becomes contaminated in the operation and half is wasted. Sufficient progress has been made for the scientists to predict an improvement so that only 20% will be wasted. The directors of Happy Ltd consider both projects will be successful. In addition, the company has enough finances to complete both projects and enough capacity to see both projects through to a successful conclusion. The cost incurred during the year were:

project	AY	BY
Staff salaries	15000	10000
overhead(direct cost)	26000	12000
plant on cost( life 10 years)	20000	60000

Required: In relation to MFRS138 Intangible Assets, 

(a) Define 

(i) Research and 

(ii) Development 

(b) Say under what circumstances it would be appropriate to defer development (capitalize) expenditure to future periods.

(c) Show how the expenditure on projects AY and BY would be dealt with in the statement of financial position and statement of comprehensive income in accordance with MFRS 138 Intangible Assets.