Rusklady Ltd (Rusklady) manufactures and distributes rusks to a variety of retailers and has a 31 December year end. The following balances and relevant information were obtained from the financial records of Rusklady: Intangible asset Rusklady is a leader in the field of rusk products and is constantly improving their range of products. Due to the increasing levels of diabetes among people, the research team did extensive research on the Glycemic Index (GI) and the effect of carbohydrates in foods on peoples blood glucose and insulin levels. The research team was also looking into new ideas to develop innovative high nutritional value products, which is low in GI. Research costs of R150 000 were incurred for the year ended 31 December 20.16. The research focused on the positive effect of a high-fiber diet and the improvement in glucose levels after consumption of abstracts of the leaves of the Calotropis plant. Based on the research findings, testing of the effects of a new high fiber rusk, containing Calotropis elements, started on 1 January 20.17, but there was still uncertainty as to whether they would be able to remove the bitter taste from the rusks. Development costs incurred up to 30 June 20.17 amounted to R120 000. On 30 June 20.17 the development team was satisfied that they had made a breakthrough and prospects were looking good. Market research indicated that the public were very excited and looking forward to the new healthier product. On 1 December 20.17 the clinical trials were completed successfully and the production of the new healthy living rusks commenced. It is estimated that the demand for the new rusks will last for at least three years. Total development costs incurred for the year ended 31 December 20.17 amounted to R180 000. Development costs are amortised evenly over three years with no residual value. Ignore all forms of tax.

Required

Discuss the accounting treatment (excluding presentation and disclosure) in respect of the research and development costs of Rusklady in terms of IAS 38 Intangible Assets for the financial years ended 31 December 20.16 and 20.17