Question

In the footnotes to the IFRS-based 2012 financial statements of European Aeronautical Defense and Space Company (EADS), parent company for Airbus, research and development (R&D) expenses were reported at 3,142 million euros. Also included in the footnotes is a chart describing the activity during 2012 in an intangible asset account called “capitalized development costs,” which shows the following (in million euros):
Beginning balance ......... 965
Increases ............ 572
Amortization ........... (172)
Ending balance .......... . 1,365

REQUIRED:
a. Explain the nature of the account called “capitalized development costs,” and how EADS is accounting for R&D.
b. How would this account be treated if EADS followed U.S. GAAP?
c. Estimate the amount of R&D expense EADS would have recognized during 2012 if it had followed U.S. GAAP.
d. Estimate the overall effect on 2012 net income of using IFRS vs. U.S. GAAP to account for R&D costs.



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  • CreatedAugust 19, 2014
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