Tutorial Solution Week 9 - ACCY200 FINANCIAL ACCOUNTING IIA...

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ACCY200 FINANCIAL ACCOUNTING IIA SPRING 2009 WEEK 9 TUTORIAL SOLUTIONS: LEO Chapter 7 Review Question 6, 7, 8; Case Study 2, 3, 8; Practice question 7.12. REVIEW QUESTIONS 6. What intangibles can never be recognised if internally generated? Why? Para 63 states: Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance shall not be recognised as intangible assets Para 64 gives the reason: Expenditure on internally generated brands, mastheads, publishing titles, customer lists and items similar in substance cannot be distinguished from the cost of developing the business as a whole. Therefore, such items are not recognised as intangible assets. 7. Explain the difference between ‘research’ and ‘development’. Para 8 contains the following definitions: Research is original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding. Development is the application of research findings or other knowledge to a plan or design for the production of new or substantially improved materials, devices, products, processes, systems or services before the start of commercial production or use. Para 56 gives examples of research activities: (a) activities aimed at obtaining new knowledge; (b) the search for, evaluation and final selection of, applications of research findings or other knowledge; (c) the search for alternatives for materials, devices, products, processes, systems or services; and (d) the formulation, design, evaluation and final selection of possible alternatives for new or improved materials, devices, products, processes, systems or services. Para 59 gives examples of development activities: (a) the design, construction and testing of pre-production or pre-use prototypes and models; (b) the design of tools, jigs, moulds and dies involving new technology; (c) the design, construction and operation of a pilot plant that is not of a scale economically feasible for commercial production; and (d) the design, construction and testing of a chosen alternative for new or improved materials, devices, products, processes, systems or services
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8. Explain when development outlays can be capitalised.
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Tutorial Solution Week 9 - ACCY200 FINANCIAL ACCOUNTING IIA...

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