Question

Trecek Corporation incurs research and development costs of $666,000 in 2017, 30 percent of which relate to development activities subsequent to IAS 38 criteria having been met that indicate an intangible asset has been created. The newly developed product is brought to market in January 2018 and is expected to generate sales revenue for 10 years.

Assume that a U.S.–based company is issuing securities to foreign investors who require financial statements prepared in accordance with IFRS. Thus, adjustments to convert from U.S. GAAP to IFRS must be made. Ignore income taxes.

Required:

1. Prepare journal entries for research and development costs for the years ending December 31, 2017, and December 31, 2018, under (1) U.S. GAAP and (2) IFRS.

2. Prepare the entry(ies) that Trecek would make on the December 31, 2017, and December 31, 2018, conversion worksheets to convert U.S. GAAP balances to IFRS.

Answer 1

Ansese TOurnalentics Dos GAAR Dale eohRecach aud development eapeuces evedik LF Debit parfauars 666000 666.c00 To cash To Recod CastReDenpeused under us.GAAP ERA 466,200 5o17Researeh aud devalopmautenpeuey $666000x 70 Development ca- Deferred tk a 4666.000x 30y.) To Casl TO ecosd Cost D empeuged $199800 |666000 under IFR Us.GrAAP 2018 DEC3 eutry No e gbl&2FRS nesAmotBahonexpeuse Ak, $1980 Dr $19980 To Development cesh-pefered T vecord amorialion enpense7 Ouualeuts pastiaulars 0Developmeut Cask- Deferreol k LE Debit credit Date 199,800 To Reseancl aud develop meut expeutes TO ecosd couversion ob heet entry in 2017 Developmeut ca- De feved 4e .To Retaiurd earuinas To tecord couversion aork Shut 199.800 199, 800 2018 Deaa) /99,g00 19980 o1Amosgaton expeuse Me Dec 4/9980 To Development cost- De terred TOrecord couversion oork hut entry i 201