Please explain in full writing the entire working out and explanation to get to the answer, please

I) Re-calculate the summary forecast Income Statement to reflect the change in accounting policy for research and development. Provide your answers in the boxes below.

I) According to the AASB Framework and AASB138 Intangible Assets, what is the appropriate treatment for research costs?

I) Discuss the cash flow implications of the proposed accounting policy changes for the year 2007 only.

I) Are the proposed policy changes to research and development costs in compliance with the AASB Framework and AASB138?

Innovamatics Ltd is a software technology company which commenced its operations at the beginning of 2006. It plans to list on the Australian Stock Exchange in 2008. The company believes that it can start selling its software programme from 2007 (Sales forecasts are in the Income Statement below). The software programme is to be sold and delivered (i.e. downloaded) via the Internet, thus allowing the company to avoid product sales and delivery costs. The Chief Technology Officer (CTO) believes that the company needs to carry out research and development activities throughout its lifecycle to keep up with the ever-changing computer technologies. The following schedule provides the expected expenditure on research and development. Expected expenditure: ($000s) 2007 2009 2006 1,000 2008 600 Research Development 600 600 The company's current accounting policy for research and development costs is as follows: Research Development Immediate expensing 3 years straight line amortisation The summary forecast income statement is as follows: Summary Forecast Income Statement ($000s) 2006 2007 2008 2009 Sales 0 500 1,000 2,000 Less: Operating Expenses 200 300 400 500 Expenses relating to: Research 1,000 600 Development 200 200 400 Total Expenses 1,200 500 1,200 900 Net profit before tax (1,200) 0 (200) 1,100 The Chief Financial Officer (CFO) notices that as the company is expected to make a loss in 2008, it would be difficult to go for a public listing in 2008. He therefore asks you, the new graduate recruit who has recently joined the company, to change the accounting policy on research and development costs: research costs expected to be incurred in 2008 and onwards will be capitalised and amortised over 3 years, and development costs expected to be incurred in 2007 and onwards will be immediately expensed. Innovamatics Ltd is a software technology company which commenced its operations at the beginning of 2006. It plans to list on the Australian Stock Exchange in 2008. The company believes that it can start selling its software programme from 2007 (Sales forecasts are in the Income Statement below). The software programme is to be sold and delivered (i.e. downloaded) via the Internet, thus allowing the company to avoid product sales and delivery costs. The Chief Technology Officer (CTO) believes that the company needs to carry out research and development activities throughout its lifecycle to keep up with the ever-changing computer technologies. The following schedule provides the expected expenditure on research and development. Expected expenditure: ($000s) 2007 2009 2006 1,000 2008 600 Research Development 600 600 The company's current accounting policy for research and development costs is as follows: Research Development Immediate expensing 3 years straight line amortisation The summary forecast income statement is as follows: Summary Forecast Income Statement ($000s) 2006 2007 2008 2009 Sales 0 500 1,000 2,000 Less: Operating Expenses 200 300 400 500 Expenses relating to: Research 1,000 600 Development 200 200 400 Total Expenses 1,200 500 1,200 900 Net profit before tax (1,200) 0 (200) 1,100 The Chief Financial Officer (CFO) notices that as the company is expected to make a loss in 2008, it would be difficult to go for a public listing in 2008. He therefore asks you, the new graduate recruit who has recently joined the company, to change the accounting policy on research and development costs: research costs expected to be incurred in 2008 and onwards will be capitalised and amortised over 3 years, and development costs expected to be incurred in 2007 and onwards will be immediately expensed