Learn 6.3.3 Amortisation Development costs must be amortised in line with the rules of IAS 38 as laid out in Section 2.3.2. Amortisation begins when commercial production or sales commence EG Learning example 6.3 Drummond develops and produces medicinal drugs to combat contagious diseases In the year ended 31 July 20X9, it was involved in the following: 1. A project to investigate whether a new plant species found deep in the Madagascan rainforest had healing properties. Money spent on the project amounted to $28,400. 2. A project to develop a new pandemic flu vaccine. The project started during the year and is currently at a stage where clinical trials are approximately 12 months away and, assuming that they are successful, sales a further 12 months away. Costs incurred during the year amounted to $38,000 on materials and $145,000 on staff costs. A competitor is also developing a similar project and is thought to be (13)months from commercial production. If the competitor's product reaches the market first, Drummond is unlikely to achieve sales. 3. An ongoing project to develop a cure for dengue fever. The project was undertaken a number of years ago and meets the capitalisation criteria of IAS 38 To date, $378,000 has been capitalised. During the year the following amounts related to the project: $176,000 $90,000 $450,000 $22,500 Staff costs. Materials costs. To build and equip a dedicated laboratory. Depreciation of the laboratory and equipment. How should these projects be treated in the financial statements of Drummond in the year ended 31 July 20x9? 205