Question

At a meeting on 16 June 2019, the directors of Swan Ltd decided to change the company’s accounting policy in regard to research and development expenditure. In previous years, research and development expenditure had been capitalized and amortized over 3 years. In line with this policy, $75 000 was capitalized on 1 January 2018. The new policy is to write off all research and development to expense when incurred. During the year ended 30 June 2019, the company spent a further $62 000 on research and development which was capitalized on 1 January 2019. Research and development expenditure is allowable as a deduction for tax purposes when incurred.

Required

Prepare any note disclosures required by AASB 108/IAS 8 in respect of the change in accounting policy. Show all workings

Answer 1

Answer: Page 1 * As per the given will be TAS &- change in accounting policy The change is only welcomed if such change:*) As required by statutory Requirement As the presentation and disclosure more reliable and relevant. =) Thus in the given case concerned, Capitalizing Research and Development expenses, without satisfying the criteria of IAS 38 intangible Asset, is not supporting steps as per accounting Standards and guidance. =) Hence Expenditure in the name of research and Development shall be charged to statement ement on Retrospective basis, income

Page 2 change in accounting policy . » As pea IAS 8 states that accounting Policy must be coherence with the accounting Standard and guidance, no organization can made acounting policy which are not in coherence with accounting Standards as issued by the in Board > Above citing can be Seen in IAS 6 exploration standards in respect of intangible, it clearly states the same, Accounting policy in respect of Intangible shall be as - Hence from above the action is rectification of earlier posted entry and not the change in accounting Policy per IAS 38.

Page 3 Hence here company will rectify retro- spectively the wrongly capitalization of research and Development cost. Hence 75000$ and 62000$ shall be deversed and changed to income statement secondly earlier amortization expenses to be reversed also. X Please give me thumb up.