Question: Fish n Chip Sdn Bhd is developing a new production process. During 2020, expenditure incurred was RM500,000 of which RM400,000 was incurred before 1 December

Fish n Chip Sdn Bhd is developing a new production process. During 2020, expenditure incurred was RM500,000 of which RM400,000 was incurred before 1 December 2020 and RM100,000 was incurred between 1 December 2020 and 31 December 2020. The entity is able to demonstrate that, at 1 December 2020, the production process met the criteria for recognition as an intangible asset.

During 2021, expenditure incurred is RM400,000. At the end of 2021, the recoverable amount of the know-how embodied in the process (including future cash outflows to complete the process before it is available for use) is estimated to be RM450,000.

Required: Explain how the above transactions should be accounted for in accordance to MFRS 138, Intangible Assets.

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