Jet Li Berhad (JLB) has built an offshore wind farm with thepurpose of testing the efficiency of its prototype wind turbines.JLB has applied to the authority for approval for production of itsnew prototype but has only received permission to test theprototype wind turbine. The wind farm development will enable JLBto test the reliability of the new wind turbines which shouldassist in developing more efficient and cost effective offshorewind turbines but as yet, there has not been any commercialproduction of the prototype wind turbines as there is still someslight doubt over the durability of the wind turbine in extremeweather conditions. The renewable energy generated during thetesting phase of the wind turbines is sold to the nationalregulator of electricity. There is sufficient resource to completethe wind farm project but the energy income has not been includedin management’s resource planning. The Board of Directors of JLBwishes to know how the expenditure on the wind farm and the incomefrom the sale of energy should be treated in the financialstatements.
Required :
As the accountant of Jet Li Berhad, advise the Board ofDirectors regarding the recognition of development costs and theincome from the sale of energy in the financial statements inaccordance to MFRS 138 Intangible Assets.
