CD is a manufacturing entity that runs a number of operations including a bottling plant that bottles

Question:

CD is a manufacturing entity that runs a number of operations including a bottling plant that bottles carbonated soft drinks. CD has been developing a new bottling process that will allow the bottles to be filled and sealed more efficiently.
The new process took a year to develop. At the start of development, CD estimated that the new process would increase output by 15% with no additional cost (other than the extra bottles and their contents). Development work commenced on 1 May 2005 and was completed on 20 April 2006. Testing at the end of the development confirmed CD's original estimates.
CD incurred expenditure of €180 000 on the above development in 2005/06.
CD plans to install the new process in its bottling plant and start operating the new process from 1 May 2006.
CD's date is 30 April. Required:
(i) Explain the requirements of IAS 38, for the treatment of development costs.
(ii) Explain how CD should treat its development costs in its for the year ended 30 April 2006.
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