Alpha Inc., a motor vehicle manufacturer, has a research division that worked on the following projects during the year:

Project 1 Research aimed at finding a steering mechanism that does not operate like a conventional steering wheel but reacts to the impulses from a driver’s fingers.

Project 2 The design of a prototype welding apparatus that is controlled electronically rather than mechanically. The apparatus has been determined to be technologically feasible, salable, and feasible to produce.

The following is a summary of the expenses of the research division (in thousands of €):

Five percent of administrative personnel costs can be attributed to each of Projects 1 and 2. Explain the accounting treatment of Alpha’s costs for Projects 1 and 2 under IFRS and US GAAP.

Transcribed Image Text:

Material and services Labor Direct labor Administrative personnel Overhead Direct Indirect General 128 720 270 Project 1 935 630 340 110 Project 2 620 320 410 60