The manager of X Ltd received aproposal from the Technology and Innovation Department, to undertake a research project on how artificial intelligence could be applied to increase the efficiency of the companys production processes. In response, the manager replied: Its a great idea!We have the resources and I wish we could do it. However, AASB 138 requires research costs to be expensed. This will reduce profit and cause the share price to drop because investors will think X Ltdis less profitable.

Required a) Identify the four separate claims made in the underlined part of the quote. b) Evaluate the claims, drawing on your knowledge of accounting standards and accounting theory as applicable.