Question 1 Please provide a list of activities that should be included in the cost of research and development? In your answer differentiate between research activities and development activities Question 2 In few paragraphs explain the change in requirements for accounting for research and development costs resulting from adopting International Financial Reporting Standards. Do the current requirements provide a better representation of the financial performance and financial position of the entity? Question 3 IP Ltd reports the following intangible assets: Patents at directors' valuation less Accumulated amortisation 141 (35) 106 Trademarks, at cost Goodwill, at cost ess Accumulated amortisation 38 30 Brand name Licence at cost less Accumulated amortisation 8 Patents were acquired at a cost of $70 million and were revalued soon afterwards. They have an estimated life of 16 years, of which 12 years remain. The trademark can be renewed indefinitely, subject to continued use. The cost represents registration fees, which were initially expensed but recognised five years later after the trademark had started to become recognised by consumers. Goodwill has been purchased and amortised on the straight-line basis. The brand name is stated at fair value and is internally generated. The licence has a ten-year life, of which nine years remain. The licence can be traded in an active market and has a fair value of $16 million REQUIRED A. Apply AASB 138 and state the carrying amount and whether each asset/asset class should be amortised. Specify any choice of methods permitted for IP Ltd Patent Trademark Goodwill Brand name Licence Carrying amount Cost Accum. Amort Fair value Required amortisation policy B. State how each asset, or class of assets, should be reported in accordance with AASB 138 Question 4 Innovator Ltd incurred expenditure researching and developing a cure for a common disease found in turnips. At the end of 2017 management determined that the research and development project was unlikely to succeed because trials of the prototype had been unsuccessful. During 2018 a breakthrough in agricultural science improved chances of the product succeeding and development resumed. The project was completed in 2018. At the end of 2018 costs incurred on the project were expected to be recoverable. Innovator expects that 15 per cent of the project revenue will be received in 2019, 25 per cent in 2020, 30 per cent in 2021, 20 per cent in 2022 and 10 per cent in 2023. After five years the product will be at the end of its useful life because the disease found in turnips will have been eradicated. Costs incurred were as follows: Research Development 2017 2018 36,000 14,800 12,800 56,000 REQUIRED A. How much research expenditure and development expenditure should be recognised as an expense in 2017? B. How much research and development expenditure should be recognised as an expense in C. State how much expenditure should be carried forward (deferred) and reported in the statement D. Prepare journal entries for the amortisation of deferred costs in 2019 and 2020, assuming that 2018? of financial position at the end of 2017 and 2018 actual revenues are as expected. State the amount of deferred expenditure carried forward in the statement of financial position in relation to the deferred costs E. Assume that after charging amortisation based on sales revenue at the end of 2018 the discounted net cash flows expected to be generated from the deferred expenditure were estimated as $14,200. Prepare any journal entries required to account for this information