GhelaniAmit-PC-Week4.docx - To Lilly Benjamin From CPA S&B Chartered Professional Accountants RE Natural Health Haven Below is my professional opinion

GhelaniAmit-PC-Week4.docx - To Lilly Benjamin From CPA S&B...

This preview shows page 1 - 2 out of 4 pages.

To: Lilly Benjamin From: CPA, S&B Chartered Professional Accountants RE: Natural Health Haven Below is my professional opinion regarding NHH and your interest in consultation and shares in NHH. I will be talking about any accounting issues I noticed and will include any other factors that you should consider before making your decision. Research and Development – Intangible Assets Issue NHH started to develop a new botanical supplement in 20X2 to help lower cholesterol. Results for the prototype have been positive and it is now in the final stages of testing. The required cash to complete development is $100,000. Costs of $25,000 related to the development of the supplement have been tracked and capitalized. The issue is whether the costs incurred during the research and development stages can be capitalized and meets the criteria of intangible assets according to ASPE 3064. Handbook Analysis In the development phase, under ASPE 3064.40 an entity shall make an accounting policy choice to either a) expense such expenditures as incurred or b) capitalize such expenditures as an intangible asset. As per ASPE 3064.41: An intangible asset arising from development (or from the development phase of an internal project) is recognized if, and only if, an entity can demonstrate all of the following: a) the technical feasibility of completing the intangible asset so that it will be available for use or sale. This condition is met, the supplement has shown positive results and it is in the final stages of testing. In addition, the supplement is not regulated by Caandian legistlation and no external testing or approval is required, which strongly suggests that this criterion has been met. b) Its intention to complete the intangible asset and use and sell it. This condition is met, as NHH claims that they intend on having their products on shelf by mid-20X3. c) its ability to use or sell the intangible asset. This condition is not met, as the market research indicated that there was some interest but not enough to support this condition and confidently say it has been met. d) The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset. This condition is not met, as Kareem has stated that he needs $100,000 to complete development. Kareem has a large accounts payable balance and not a lot of cash on hand.
Image of page 1
Image of page 2

You've reached the end of your free preview.

Want to read all 4 pages?

  • Fall '18

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture