Garry Diplo owns MMR Manufacturing. The company has been very successful and Diplo has decided it is a good time to sell the company. He is pleased there is currently a new product in development which is certain to entice buyers. Several buyers have expressed interest in the company because of the new product and as a result, the companys sale price is listed at 25% higher than it would have been without this new project.

In, 2016 Diplo began the research and development of a special manufacturing drill. The development of the product grew from various market surveys conducted in plants that showed that manufacturing workers were unhappy with drills currently available. Costs incurred in 2019 were as follows: Cost of setting up production lab $90,000 Testing of manufacturing drill 100,000 Diplo intends on capitalizing all these costs in the December 31, 2019 year. No other costs are anticipated related to the project. The company has the technical resources to complete the project and since testing to date has been successful, management intends to bring this product to market in early 2021. The company has been experiencing cash flow difficulties in the past few months but hopes with the sale of the company additional funds will be available to see this product into production.

Required: Identify the accounting issues, analyze the issue using the standards and applying the case facts, make a recommendation and discuss the impact. To do this you will need to find the criteria for research and development in the handbook.

1. Discuss the case using IFRS using the same approach we have used in class.

2. Indicate the section of the handbook related to research and development for ASPE.