Part a ABC Ltd provides website design and maintenance services, it emplyed a team of highly skilled IT experts. It has been rapidly gaining market share over the last 3 years with their competitive pricing and good service. its management is considering what items they are allowed to capitalize on the companys financial statement. Required Explain the definition of intangible assets and criteria that need to be met for an item to be capitalized as an intangible assets under relevant Accounting Standard. (i.e. HKAS / HKFRS) (9 marks) Part b Discuss whether the following can be capitalized by ABC Ltd as intangible assets. i. Team of highly skilled IT experts ii. Goodwil gained from good customer service iii. Internally generated brand name (3 marks each, total 9 marks) Part c DEF Ltd which is a research centre for cosmetic and perfumes, its main clients are relevant manufacturers. The company incurred expendtures on various research and development projects for the year ended 31 December 2021. Project 200D Project 400E Project 600F $ $ $ Material 416,000 384,000 288,000 Wages 320,000 896,000 352,000 Directorssalary of research department 64,000 96,000 64,000 Depreciation on plant & equipment (Note 1) 96,000 112,000 32,000 Charges on cleaning, electricity and water 32,000 48,000 12,800 928,000 1,536,000 748,800 Note 1 The related plant and equipment is designed for specific research and development project. The above three projects have following information: Project 200D This is the project aimed at searching for new types of herb to use in skincare process. Project 400E This is the project studying new device to be added to the manufacturing process for perfume in order to reduce the wastage and pollution emission existing manufacturing process by 20%. Progress in this process is satisfactory and the response by perfume manfacturers during recent demonstration was encouraging. Some clients has confirmed they will order the devices. Moreover, management of DEF Ltd consdiered that the company has sufficient technical and financial resources to produce and market this new device Project 600F This is the project for developing the new line of beauty product, information obtained from market research finds that the new perfume will be accepted by end user customers. However, the budget production of this new line beauty product hasl not yet been approved by board of directors because the competiton is so keen that the profit margin may not be able to cover the administrative and distribution expenses. DEF Ltd will group the researach and development as `other expenses in Statement of profit or loss. Required Prepare the extract of Statement of profit or loss and Statement of Financial Position as at 31 December 2021 (8 marks) and discuss the accounting treatment of each of above projects (9 marks)

Part a ABC Ltd provides website design and maintenance services, it emplyed a team of highly skilled IT experts. It has been rapidly gaining market share over the last 3 years with their competitive pricing and good service. its management is considering what items they are allowed to capitalize on the company's financial statement. Required Explain the definition of intangible assets and criteria that need to be met for an item to be capitalized as an intangible assets under relevant Accounting Standard. (i.e. HKAS / HKFRS) (9 marks) Part b Discuss whether the following can be capitalized by ABC Ltd as intangible assets. i. Team of highly skilled IT experts . Goodwil gained from good customer service iii. Internally generated brand name (3 marks each, total 9 marks) Part c DEF Ltd which is a research centre for cosmetic and perfumes, its main clients are relevant manufacturers. The company incurred expendtures on various research and development projects for the year ended 31 December 2021. Project 600F $ Material Wages Directors salary of research department Depreciation on plant & equipment (Note 1) Charges on cleaning, electricity and water Project Project 200D 400E $ $ 416,000 384,000 320,000 896,000 64,000 96,000 96,000 112,000 32,000 48,000 928.000 1.536.000 288,000 352,000 64,000 32,000 12,800 748,800 1 Note 1 The related plant and equipment is designed for specific research and development project. The above three projects have following information: Project 2000 This is the project aimed at searching for new types of herb to use in skincare process. Project 400E This is the project studying new device to be added to the manufacturing process for perfume in order to reduce the wastage and pollution emission existing manufacturing process by 20%. Progress in this process is satisfactory and the response by perfume manfacturers during recent demonstration was encouraging. Some clients has confirmed they will order the devices. Moreover, management of DEF Ltd consdiered that the company has sufficient technical and financial resources to produce and market this new device Project 600F This is the project for developing the new line of beauty product, information obtained from market research finds that the new perfume will be accepted by end user customers. However, the budget production of this new line beauty product hasl not yet been approved by board of directors because the competiton is so keen that the profit margin may not be able to cover the administrative and distribution expenses. DEF Ltd will group the researach and development as 'other expenses in Statement of profit or loss. 0 Required Prepare the extract of Statement of profit or loss and Statement of Financial Position as at 31 December 2021 (8 marks) and discuss the accounting treatment of each of above projects (9 marks) (Total: 35 marks)