Page 453 - F1 Integrated Workbook STUDENT 2018

Answers

Exxampple 2

CD is a manuufacturing eentity that rruns a nummber of opeerations including a
botttling plant that bottless carbonatted soft driinks. CD has been deeveloping a
neww bottling pprocess thaat will alloww the bottlees to be filled and seaaled more
efficciently.

Thee new proccess took aa year to deevelop. At the start oof developmment, CD
estiimated thaat the new process woould increaase output by 15% wwith no
addditional cosst (other than the extrra bottles aand their contents).

Devvelopment work commenced on 1 May 200X0 and wwas compleeted on 20
Aprril 20X1. Teesting at thhe end of the developpment confirmed CDD’s original
estiimates.

CD incurred eexpendituree of $180,0000 on thee above developmentt.
CD plans to innstall the nnew processs in its bottling plantt and start operating the
neww process from 1 May 20X1.
Thee end of CDD’s reporting period iis 30 April..

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

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

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