Wyse Associates Limited has recently embarked on several projects designed to expand its business in the future.  During the year to 31 March 2019, the following information is available regarding two of the projects.

 Project A

Cost of £80,000 was incurred in substantially improving an existing product with a view to making it safer and with fewer side effects.  Tests were still ongoing at 31 March, but it was hoped to market the product in time for Christmas 2019.  In addition to the above £80,000, a special analysis machine has been purchased costing £50,000, which has a useful life of four years with a residual value of £10,000.  This will be used to carry out a range of research activities over its useful life.

Project B

The company has spent £60,000 investigating possible alternative raw materials with similar properties that it could use instead of glass (plastic has already been ruled out due to its limitations with respect to intense heat and cold).  It also purchased a machine to assist in analysing the properties of various alternative materials, for £30,000.  It is the company’s intention to spend another two years researching into this field.  At the end of this time, if the search for an alternative to glass has not proved successful, it will terminate this research.

Required: Discuss how the expenditure on Projects A and B would be dealt with in the company’s accounts for the year to 31 March 2019, and justify your decisions.

Answer rating: 100% (QA)

Answer 1 As per IAS 38 Intangible Assets an Intangible asset is an identifiable nonmonetary asset without having a physical substance Further such an ... View the full answer