CFA Level I, Financial Reporting and Analysis, Research & Development Costs

Axis Limited is a Dutch engineering firm that is currently undertaking two projects.

Project 1

A project concerning sustainable pipelines and drainage system to redirect water flow from a district in Amsterdam. The company has received approval from the city and the project implements new technology which is possible to use.

Cost: 540€ million

Project 2

Research to be conducted that concerns the connecting of two districts within the city of Rotterdam by a new bridge. The research proposal has received positive reviews.

Cost: 180€ million

Under IFRS stipulations, the amount capitalized from the two projects is closest to:

A. 720€ million

B. 180€ million

C. 540€ million

Solution: C.

IFRS mandates that companies separately identify research and development phases of projects, for internally-created intangible assets. Additionally, the internal costs incurred to generate the intangible asset during the research phase should be expensed, but those that incurred during the development phase can be capitalized as intangible assets, if the project is technologically possible, the company has shown that it is able to use or sell the resulting asset, and shown its ability to complete the project. Axis Limited can capitalize 540€ million of the first project because it meets the requirements of development.

 

 

 

0 responses on "CFA Level I, Financial Reporting and Analysis, Research & Development Costs"

    Leave a Message

    Deine E-Mail-Adresse wird nicht veröffentlicht. Erforderliche Felder sind mit * markiert.

    Über Uns

    Wir bieten seit 1994 Unterricht für BWL, VWL, Statistik und Mathematik. Mit uns bereiten Sie sich optimal auf Ihre Prüfung vor - kurz, knapp und auf den Punkt gebracht. Sie haben bei uns die Möglichkeit der Gruppenkurse und des Einzelunterrichts, der Präsenzkurse und der Skriptsammlungen.

    Wer ist Online?

    Im Moment ist niemand online.