Tutorial question IAS38 & IFRS15

On 1 January 2022, ABC given XYZ a licence with endless date to sell a flu product in Southeast Asia. ABC has kept the right sell the flu product in the rest of the world. The Southeast Asias market relative value compared to the rest of the world is 15%. The production process used to make the flu product is not specialised and several other entities could also produce it for XYZ. XYZ will buy flu product directly from ABC at 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 capitalised development costs for flu as an intangible asset at a carrying amount of RM15 million.

You are required to:

(a) 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.