Volvo Group supplies commercial vehicles including inucks, buses, construction equipment, engi and drive nes well as aircraf engine Volvo Group annually invests roughly research and development focused on achieving new technical hs focused largely on reducing environmental impact and meeting future and globally. Grown employees, p, headquartered in Torslanda, Sweden, a 000 ries in 19 countries, and sales activities in some 180 countries, Source Learning objectives development (R&D expenditures Assess the cost components included research and of and development costs Compare and evaluate alternative accounting treatments the how capitalizing product development statement, and the statement of cash flows. international methods of R&D accounting. Adjust financial statement amounts to compare Us. and Refer to the 2009 financial statements of Volvo Group. The company prepares financial statement under International Financial Reporting Standards (IFRS) Concepts expenses of SEK 13,193 (millions of 2009 income statement shows research and development a. Swedish Krona). What types of costs are likely included in these amounts? account for its research and development follows IAS Assets, to expenditures (see 38 excerpts at the end of this case). As such, the company capitalizes certain decides R&D costs and expenses others. What factors does Volvo costs to capitalize and which to expense? The R&D costs that Volvo Group capitalizes each period (labeled Product and software development costs) amortized in subsequent periods, similar to other capital such are statements that capitalized product and software development costs are amortized over three to eight years What factors would the company consider in determining the amortization period for particular costs? d. Under U.S. GAAP, companies must expense a R&D costs. In your opinion, which accounting principle or U.S. GAAP provides financial statements that better reflect costs and benefits of R&D spending? Process Refer to footnote 14 where volo reports an intangible asset for "Product and software development Assume that the product and software development costs reported in footnote the only R&D costs that Volvo capitalize What is the amount of the capitalized product and software development costs, net of accumulated amortization at the end of fiscal 2009? Which line item on Volvo Group's balance i. sheet reports this intangible asset? create a T-account for the intangible asset "Product and software development net of accumulated amortization. Enter the opening and ending balances for fiscal 20 Show entries in the T-account that record the 2009 capitalization (capital expenditures) and amortization. simplify the group all other account activity during the year and report the net impact entry in the T-account. Volvo Group-Research & Development Costs Copyright 2012by Cambridge Business Publishers. All rights reserved. No part qf this publication may be reproduced in any form for any withour the wriuen permission of the publisher. Volvo Group supplies commercial vehicles including inucks, buses, construction equipment, engi and drive nes well as aircraf engine Volvo Group annually invests roughly research and development focused on achieving new technical hs focused largely on reducing environmental impact and meeting future and globally. Grown employees, p, headquartered in Torslanda, Sweden, a 000 ries in 19 countries, and sales activities in some 180 countries, Source Learning objectives development (R&D expenditures Assess the cost components included research and of and development costs Compare and evaluate alternative accounting treatments the how capitalizing product development statement, and the statement of cash flows. international methods of R&D accounting. Adjust financial statement amounts to compare Us. and Refer to the 2009 financial statements of Volvo Group. The company prepares financial statement under International Financial Reporting Standards (IFRS) Concepts expenses of SEK 13,193 (millions of 2009 income statement shows research and development a. Swedish Krona). What types of costs are likely included in these amounts? account for its research and development follows IAS Assets, to expenditures (see 38 excerpts at the end of this case). As such, the company capitalizes certain decides R&D costs and expenses others. What factors does Volvo costs to capitalize and which to expense? The R&D costs that Volvo Group capitalizes each period (labeled Product and software development costs) amortized in subsequent periods, similar to other capital such are statements that capitalized product and software development costs are amortized over three to eight years What factors would the company consider in determining the amortization period for particular costs? d. Under U.S. GAAP, companies must expense a R&D costs. In your opinion, which accounting principle or U.S. GAAP provides financial statements that better reflect costs and benefits of R&D spending? Process Refer to footnote 14 where volo reports an intangible asset for "Product and software development Assume that the product and software development costs reported in footnote the only R&D costs that Volvo capitalize What is the amount of the capitalized product and software development costs, net of accumulated amortization at the end of fiscal 2009? Which line item on Volvo Group's balance i. sheet reports this intangible asset? create a T-account for the intangible asset "Product and software development net of accumulated amortization. Enter the opening and ending balances for fiscal 20 Show entries in the T-account that record the 2009 capitalization (capital expenditures) and amortization. simplify the group all other account activity during the year and report the net impact entry in the T-account. Volvo Group-Research & Development Costs Copyright 2012by Cambridge Business Publishers. All rights reserved. No part qf this publication may be reproduced in any form for any withour the wriuen permission of the publisher