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Question 2 Pharma is a group of companies listed in the EU reporting under lFRSs. The company develops and makes a large portfolio of pharmaceutical

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Question 2 Pharma is a group of companies listed in the EU reporting under lFRSs. The company develops and makes a large portfolio of pharmaceutical products, both for the healthcare and beauty markets. Pharma's customers include hospitals, governments, pharmacies and retail paraphan'nacy and supermarket chains. The company has two divisions: Research & Development and Fabrication. In addition to working for the Pharma groupI the Research & Development division also conducts research and development on behalf of smaller pharmaceutical companies and for governments. (a) (b) Due to the nature of its business, Pharma undertakes a signicant amount of new research and development expenditure each year. During the current nancial reporting period. Pharma started two new signicant development projects and abandoned development on another project which was not generating the results expected in human trials, as well as some signicant adverse side effects. One of the testers is suing Pharma for hair-loss suffered in one trial, although Pharma's lawyers have advised that the chances of success are slim given that a legal contract outlining the risk was signed with the human testers. One of the drugs that had been developed in recent years went into commercial production for the rst time during the year and has been an instant success. (5 marks) February 20X? Pharma won a signicant new contract to make large quantities of a generic drug for the government of a developing country. Under the terms of the arrangement with the government, payment is made on delivery in cash once customs have been cleared. Pharma bears the risks of shipping and will replace any shipment that is damaged or goes missing. The drugs will be delivered four times a year on 1 April, 1 July, 1 October and 1 January. The batches made for 1 April 20x7 and 1 July 20x7 were delivered and paid for successfully, although Pharma incurred signicant costs in determining the customs arrangements for the rst delivery. The 1 October batch was despatched prior to the year end, delivered and paid for on 1 October 20x7. (4 marks)

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