On 1 January 2022, ABC gave XYZ a license with endless dates to sell a flu product
Question:
On 1 January 2022, ABC gave XYZ a license with endless dates to sell a flu product in Southeast Asia. ABC has kept the right to sell the flu product to the rest of the world. Southeast Asia’s market relative value compared to the rest of the world is 15%. The production process used to make the flu product is not specialized and several other entities could also produce it for XYZ. XYZ will buy flu products directly from ABC at a cost plus 45%. The product has been sold for a few years.
On 1 January 2022, XYZ made an advance payment of RM7.5 million and will make an additional payment of RM1.5 million when Southeast Asia sales exceed RM17.5 million. ABC had capitalized development costs for flu as an intangible asset at a carrying amount of RM15 million.
You are required to:
Propose how to account for the transaction above in accordance with relevant IASs/IFRSs/MFRSs.
Format:
1.Brief relevant discussion on: Key definition, Recognition, Measurement & Disclosure/Presentation of IAS38& IFRS15.
2. Propose how ABC can account for the above transaction in accordance with the above IASs.
Global Marketing management
ISBN: 978-0470505748
5th edition
Authors: Masaaki Kotabe, Kristiaan Helsen