50.1K

Verified Solution

Link Copied!

QUESTION THREE IPSAS 31 Intangible Assets sets out the principles for accounting for intangible assets. REQUIREMENTS: (a) Identify the criteria that must be satisfied before an intangible asset can be recognised in the financial statements. (4 marks) (b) What criteria must be satisfied before expenditure on internally generated research and development can be capitalised? (6 marks) (c) Vocational Education Training Authority (VETA) as part of its wide range of products and services offered, VETA develops and manufactures household and commercial cleaning products. The management team is finalizing the financial statements for the year ended 30 June 2021 and need assistance on the treatment of the following issues: (1) Research and Development expenditure in the year to 30 June 2021 totalled Tshs.12m. Half of this was incurred on research costs and the remaining amounts were incurred on the development costs of three products as follows: Products: Wash and Go Wipe Clear Soft and Clean (ii) Tshs. 3,000,000 1,200,000 1,800,000 The Wash and Go product is expected to generate high levels of sales and matching profits over the next 4 years, after which it will be replaced. The Wipe Clear product is experiencing difficulties in the final stage of product testing and there is uncertainty within the product development team of the length of time or costs needed to complete the product prior to its launch. VETA registered a 6 year patent for the Soft and Clean product effective from 30 June 2020. During the year ended 30 June 2021, a staff training programme was carried out at acost of Tshs.200,000. The training provider has ensured management that the training should result in increase in future economic benefits such as increase in profit levels. Advice the management of VETA on the treatment of the above issues (i) and (ii) in the financial statements for the year ended 30 June 2021. (10 marks)

QUESTION THREE IPSAS 31 Intangible Assets sets out the principles for accounting for intangible assets. REQUIREMENTS: (a) Identify the citeria that must be satisfied before an intangible asset can be recognised in the financial statements. ( 4 marks) (b) What criteria must be satisfied before expenditure on internally generated research and development can be capitalised? ( 6 marks) (c) Vocational Education Training Authority (VETA) as part of its wide range of products and services offered, VETA develops and manufactures household and commercial cleaning products. The management team is finalizing the financial statements for the year ended 30 June 2021 and need assistance on the treatment of the following issues: (i) Research and Development expenditure in the year to 30 June 2021 totalled Tshs. 12m. Half of this was incurred on research costs and the remaining amounts were incurred on the development costs of three products as follows: The Wash and Go product is expected to generate high levels of sales and matching profits over the next 4 years, after which it will be replaced. The Wipe Clear product is experiencing difficulties in the final stage of product testing and there is uncertainty within the product development team of the length of time or costs needed to complete the product prior to its launch. VETA registered a 6 year patent for the Solt and Clean product effective from 30 June 2020. (ii) During the year ended 30 June 2021, a staff training programme was carried out at acost of Tshs.200,000. The training provider has ensured management that the training should result in increase in future economic benefits such as increase in profit levels. Advice the management of VETA on the treatment of the above issues (i) and (ii) in the financial statements for the year ended 30 June 2021. (10 marks)

Answer & Explanation Solved by verified expert

See Answer