In 2016, Maxim Ltd decided to develop a new type of lavender sales bags, which were made from a new material. The material to be used was more like plastics and thus more resistant to damage than the traditional material used to make sales bags. In 2016, Maxim Ltd spent $350 000 on research to gain knowledge of different plastics. Maxim Ltdbelieved this knowledge could be utilised to bring significant future economic benefits.

In 2017, Maxim Ltd developed a prototype of new sales bags and asked a number of experts on plastics materials for their opinions regarding the durability of new bags. The company incurred total costs of $528 000 in developing the prototype in 2017. The experts comments were positive. Some other companies even put in orders to buy new bags. Anticipating a substantial market demand, Maxim Ltd spent $22 000 on legal costs to register a patent for new bags. The patent has a life of 4 years, after which time other producers may copy the bag design.

In 2018, Maxim Ltd conducted a large-scale marketing campaign for new bags at total costs of $650 000. The marketing campaign indicated a huge demand for new bags. Within four months, total orders for over $2 million worth of bags were received.

Maxim Ltd employed an accounting firm to estimate the present value of revenues from new bags at $15 million. The companys Chief Financial Officer decided that he would like to have this present value of the bags recognised in the companys financial statements at its fair value. While the accounting company determined the present value at $15 million, a major competitor of Maxim Ltd made a legally binding offer to buy the patent for new bags at a price of $12 million.

Required:

Describe how to account for the events and costs incurred each year.. Note: You are expected to refer to the relevant sections and paragraphs in AASB 138 Intangible

Question 3 (18 Marks) In 2016, Maxim Ltd decided to develop a new type of lavender sales bags, which were made from a new material. The material to be used was more like plastics and thus more resistant to damage than the traditional material used to make sales bags. In 2016, Maxim Ltd spent $350 000 on research to gain knowledge of different plastics. Maxim Ltd believed this knowledge could be utilised to bring significant future economic benefits. In 2017, Maxim Ltd developed a prototype of new sales bags and asked a number of experts on plastics materials for their opinions regarding the durability of new bags. The company incurred total costs of $528 000 in developing the prototype in 2017. The experts' comments were positive. Some other companies even put in orders to buy new bags. Anticipating a substantial market demand, Maxim Ltd spent $22 000 on legal costs to register a patent for new bags. The patent has a life of 4 years, after which time other producers may copy the bag design. In 2018, Maxim Ltd conducted a large-scale marketing campaign for new bags at total costs of $650 000. The marketing campaign indicated a huge demand for new bags. Within four months, total orders for over $2 million worth of bags were received. Maxim Ltd employed an accounting firm to estimate the present value of revenues from new bags at $15 million. The company's Chief Financial Officer decided that he would like to have this present value of the bags recognised in the company's financial statements at its fair value. While the accounting company determined the present value at $15 million, a major competitor of Maxim Ltd made a legally binding offer to buy the patent for new bags at a price of $12 million Required: Describe how to account for the events and costs incurred each year.. Note: You are expected to refer to the relevant sections and paragraphs in AASB 138 Intangible Open in