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Jaguar Land Rover PLC Jaguar Land Rover Automotive PLC ( JLR ) is a maker of luxury autos based in Coventry, United Kingdom. JLR uses
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 yearend of March You have been asked to use your knowledge of IFRS to convert key metrics for the company to a US GAAP basis. For simplicity, you may assume that the only material differences between JLRs asreported numbers and those it would report under US GAAP are traceable to its policy of capitalizing development costs.
Internally Generated Intangible Assets from Footnote 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
Year ended March
millions
Total research and development costs incurred
Research and development expensed
Development costs capitalized
page
Intangible Assets selections from Footnote
Cost
Product Development in Progress millions
Capitalized Product Development millions
Balance at March
Additionsinternally developed
Transfers
Disposals
Balance at March
Amortization
Balance at March
Amortization for the year
Disposals
Balance at March
Net book value at March
Required:
What percentage of R&D expenditures was capitalized during the fiscal year ending March How does this percentage compare with the capitalization ratios of the German automakers profiled in Exhibit
Estimate the average useful life of product development costs by dividing average capitalized product development costs by the amortization expense for fiscal Compute average capitalized product development costs as simple average balances at the beginning and end of each fiscal year. Does your estimate fall within the range of the useful lives for development costs disclosed in the accounting policy footnote?
The table below contains metrics as reported in JLRs three primary financial statements. Convert these metrics to a US GAAP basis. Where necessary assume that JLRs tax rate is percent, a rate disclosed in Footnote Taxation.
As Reported IFRS millions
US GAAP
Profit before tax
Net profit after tax
Total assets
Shareholders equity
Operating cash flow
Capital expenditures
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