James Bond, the new accountant of Adco Limited, a pharmaceutical company, is unsure about how to account for research and development costs. He believes that all associated research and development costs should be expensed as running costs of the business and that these costs will not always result in future economic benefits flowing to the company. However, the previous accountant had capitalised costs incurred on research and development as he felt that it added to Adco Limited’s income generating structure and that this value would last for more than one period. James has asked you for advice on this matter.

2 Required Write a memorandum to respond to James’s query regarding how to recognize the research and development costs. Your discussion should include reference to both the Conceptual Framework and IAS 38 Intangible Assets.

 

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Subject Recognition of Research and Development Costs Dear James I hope this message finds you well In response to your query regarding the treatment ... View the full answer