True/False Questions 1. As in GAAP, under IFRS the costs associated with research and development are segregated into two components. 2. Costs in the research phase are expensed under GAAP, but capitalized under IFRS. 3. Costs in the research phase are always expensed under both IFRS and GAAP. 4. IFRS differs from GAAP in the development phase in that IFRS requires that costs are capitalized once technological feasibility is achieved. 5. The increased acceptance of IFRS has caused costs associated with internally generated intangible assets to be capitalized under GAAP. 6. IFRS permits some capitalization of internally generated intangible assets, if it is probable there will be a future benefit and the amount can be readily measured. 7. While IFRS requires an impairment test at each reporting date for long-lived assets, it requires no such test for intangibles once a legal or useful life has been determined. 8. IFRS allows reversal of impairment losses when there has been a change in economic conditions or in the expected use of the asset. Under GAAP, impairment losses cannot be reversed for assets to be held and used. 9. IFRS and GAAP are similar in the accounting for impairments of assets held for disposal. 10. Under GAAP, impairment loss is measured as the excess of the carrying amount over the assets discounted cash flow. Multiple-Choice Questions 11. As in GAAP, under IFRS the costs associated with research and development are segregated into a. two components, the research phase and the production phase. b. two components, the research phase and the development phase. c. three components, the planning phase, the research phase and the production phase. d. three components, the analysis phase, the development phase and the production phase. 12. In accounting for internally generated intangible assets, GAAP requires that a. all costs, no matter how immaterial, be capitalized. b. only material costs be capitalized. c. planned costs be capitalized, while costs in excess of plan be expensed. d. all costs be expensed. Use this information for #13 and #14 13. The following costs are incurred during the research and development phases of a laser bone scanner Laboratory research aimed at discovery of new knowledge $800,000 Search for application of new research findings 400,000 Salaries of research staff designing new laser bone scanner 1,200,000 Material, labor and overhead costs of prototype laser scanner 850,000 Costs of testing prototype and design modifications 450,000 Engineering costs incurred to advance the laser scanner to full production stage 700,000 (technological feasibility reached)