i. FM Holding PLC has developed and patented a new drug, which has been approved for clinical
Question:
i. FM Holding PLC has developed and patented a new drug, which has been approved for clinical use. The costs of developing the drug were K12 Billion. Based on early assessments of its sales success, M & I, Brand has estimated its market value at K20 Billion.
ii. In the current accounting period, FM Holdings PLC has spent K3 Billion sending its staff on specialist training courses. Whist these courses have been expensive, they have led to a marked improvement in production quality and staffs now need less supervision. This in turn has led to an increase in revenue and cost reductions. The directions of FM Holdings PLC believe these benefits will continue for at least three years and wish to treat the training costs as an asset.
iii. In December 2004, FM Holdings PLC paid K5 Billion for a television advertising campaign for its products that will run for 6 months from 1 January, 2005 to 30 June 2005. The Directors believe that increased sales as a result, of the publicity will continue for two years from the start of the advertisement.
Required:
Explain how the directors of FM Holdings PLC should treat the above items in the financial statements for the year to 31 March 2005.
Expert Answer:
Answer Treatment of the items in the financial statements of FM Holdings PLC for th... View the full answer
