iii) Agro has invested in two new potential products in the current financial year. Initial research has been carried out in relation to product A, incurring total costs of £120,000. Development of product B commenced during the year to 31 March 2021, and sales are expected to begin in April 2021. The development costs incurred in relation to product B are £220,000. Previous research costs incurred in relation to product B of £100,000 were expensed in the prior fiscal year. Agro have now capitalized £320,000 of costs in relation to product B, as the research previously expensed led to development. The £120,000 of costs incurred in relation to product A have been expensed to profit or loss. 4 marks

iv) Argo holds specialised plant, with an estimated useful life of five years, which originally cost £800,000 two years ago. This year, there has been a change in legislation, which has meant that the plant cannot be used at the economic capacity originally intended. It is now estimated that the fair value of the plant is £450,000, and costs to sell would total £20,000. If the plant continued to be used, it would generate cash flows of £120,000 per annum for three years, and then could be sold for estimated disposal proceeds of £50,000. The cost of capital for Agro is 7%.

Explain the required IFRS accounting treatment of the above issues.

Answer rating: 100% (QA)

According to IFRS Research expense will be charged to profit and loss account and would never be cap... View the full answer