Headquartered in Rome, Italy Finmeccanica S.p.A. is a multinational conglomerate operating in the defense and aerospace sectors. The company uses IFRS for its financial reports and disclosed the following in its annual report:

Required

a. How are R\&D costs accounted for under IFRS?

b. For each of the three energy sector R\&D items described above, determine if the item meets the criteria for capitalization under IFRS.

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Research and development activities for the Energy Sector focused primarily on the following items in 2010: Gas turbines: AE94.3A turbine development projects to raise power, efficiency and operational flexibility, while complying with requirements on pollutants in exhaust gas, and projects to retrofit the AE94.2 turbine to increase the power and extend the life of the Class E turbine; Steam turbines: international projects investigating the behaviour of special materials (extremely high temperature steels and super alloys) with a view to developing the "ultrasupercritical" turbine (with a power rating in excess of 300 MW); Generators: development work on the new air-cooled 400-MVA model intended to complement the large, high-performance gas turbines.