So-Tech is developing a new product called “Playfun”. During the year ended 31 December 2021, So-Tech spent RM3.2 million on researching and developing a new product, and the breakdown of the expenditure is provided below: Research into materials RM0.8 million Market research RM0.9 million Employee training RM0.3 million Development activities RM1.2 million The expenditure on development activities were incurred evenly over the year. On 1 st May 2021, the market research indicated that the product was likely to be profitable and the product development was not yet complete for the year ended 31 December 2021. So-Tech directors have agreed to sell a surplus office property in order to raise fund for the development of a new game to meet the market demand and has tentatively started looking for a buyer for the property. The price of the property has been fixed at RM2.3 million while the surveyor has valued the building based on market prices at RM2million. The directors would like to propose the property be disclosed under the noncurrent asset that is held for sale as they have agreed to sell the property in the directors’ meeting.

a. Critically evaluate the accounting treatment of the above in the financial statements of So-Tech for the year ended 31 December 2020.

Answer rating: 100% (QA)

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