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Sharapova plc is a company in the pharmaceutical sector, specialising in gene therapies. Sharapova plc launched a new drug, Cannibox on 1st April 2020. The

Sharapova plc is a company in the pharmaceutical sector, specialising in gene therapies.

Sharapova plc launched a new drug, Cannibox on 1st April 2020. The project began on 1st June 2019 and took 10 months to complete. Sharapova expected to sell 1,000,000 units, as the product, although expensive, had significant benefits over existing treatments. Initial trials were disappointing due to side effects and Sharapova spent 2m on development costs before finding a formula that was feasible to use as a medicine. A further 3.2m was spent on development costs before the product was ready to use.

Sales have so far been disappointing with only 50,000 units sold. To try to boost sales the company spent 300,000 on promoting Cannibox. Sales have picked up a little but it does not look as though they will achieve budget.

The total development costs on the draft Statement of financial position at 30th April 2020 are as follows:

m

Research

1.5

Development

5.2

Promotional

0.3

Total

7.0

Requirements

  1. Define the term intangible asset. (1 mark)

  1. Discuss whether the company has accounted for Cannibox in accordance with IAS 38 Intangible Assets. (6 marks)

  1. Assuming the company now only expects to produce 800,000 units in total, provide extracts from the Statement of financial position showing how development costs should appear for the year ended 30th April 2020 and calculate the total amount that would be expensed in the year ended 30th April 2020. (3 marks)

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