Page 194 - F1 Integrated Workbook STUDENT 2018

Chaptter 11

Exxampple 2

CDD is a manuufacturing eentity that runs a nummber of opeerations inncluding a
bottling plant that bottles carbonatted soft driinks. CD has been deeveloping a
neww bottling pprocess thaat will alloww the bottlees to be fillled and seealed more
efficciently.

Thee new proccess took aa year to deevelop. At the start oof developmment, CD
estimated thaat the new process wwould increaase outputt by 15% wwith no
addditional cosst (other than the extra bottles aand their ccontents).

Devvelopmentt work commmenced on 1 May 200X0 and wwas compleeted on 20
Aprril 20X1. Teesting at thhe end of tthe developpment confirmed CDD’s original
estimates.

CDD incurred eexpendituree of $180,0000 on thee above developmentt.

CDD plans to innstall the nnew processs in its boottling plantt and start operating the
neww process from 1 May 20X1.

Thee end of CDD’s reporting period is 30 April..

Reqquired:

(a) Explain the requirements oof IAS 38 IIntangiblee Assets foor the
treatmeent of deveelopment costs.

(b) Explain how CD sshould treeat its devvelopment costs in iits financial
statemeents for thhe year ended 30 Appril 20X1.

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