Power Limited has spent Rs. 200,000 researching new cleaning chemicals in the year ended 31
December 2020. They have also spent Rs. 400,000 developing a new cleaning product which will
not go into commercial production until next year. The development project meets the criteria laid
down in IAS 38 Intangible Assets.
How should these costs be treated in the financial statements of Power Limited for the year ended
31 December 2020?

Which TWO of the following items below could potentially be classified as intangible assets?

Star Limited has provided the following information as of 31 December 2016:
(i) Project A – Rs. 500,000 has been spent on the research phase of this project during the
year.
(ii) Project B – Rs. 800,000 had been spent on this project in the previous year and Rs. 200,000
this year. The project was capitalized in the previous year however, it has been decided to
abandon this project at the end of the year.
(iii) Project C – Rs. 1,000,000 was spent on this project this year. The project meets the criteria
of IAS 38 and is to be capitalized.
Which of the following adjustments will be made in the financial statements as of 31 December
2016?

Which of the following statements concerning the accounting treatment of research and
development expenditure is true, according to IAS 38 Intangible Assets?
(i) Research is original and planned investigation undertaken with the prospect of gaining new
knowledge and understanding.
(ii) Development is the application of research findings.

(iii) Depreciation of plant used specifically on developing a new product can be capitalized as
part of development costs.
(iv) Expenditure once treated as an expense cannot be reinstated as an asset.

Which of the following should be included in a company’s statement of financial position as an
intangible asset under IAS 38 Intangible Assets?

Which TWO of the following criteria must be met before development expenditure is capitalised
according to IAS 38 Intangible Assets?

Which of the following shall be capitalised as intangible asset in financial statements?

Which of the following CANNOT be recognized as an intangible non-current asset in Ghalib Limited
(GL)’s consolidated statement of financial position at 30 September 2021?

Which of the following could be classified as development expenditure in Mars Limited’s statement
of financial position as of 31 March 2020 according to IAS 38 Intangible Assets?

Which TWO of the following factors are reasons why key staff cannot be capitalized as an intangible
asset by an entity?

Which of the following items should be recognized as intangible assets?
(i) Patent for new drug
(ii) Licence for new vaccine
(iii) Specialist training courses

Home Limited (HL) has acquired a subsidiary Stairs Limited (SL) in the current year. SL has a brand
that has been reliably valued by HL at Rs. 500,000, and a customer list which HL has been unable
to value.
Which of these describes how HL should treat these intangible assets of SL in their consolidated
Financial Statements?

IAS 38 gives examples of activities that would be regarded as research and therefore not eligible
for recognition as an intangible asset.

Which one of the following would be an example of research costs?

Which of the following statements relating to intangible assets is true?

Hali Limited is developing a new product and expects to be able to capitalize on the costs. Which one
of the following would preclude capitalization of the costs?

During the year to 31 December, 2018 Faiz Limited (FL) incurred Rs. 200,000 of development costs
for a new product. In addition, FL spent Rs. 60,000 on 1 January 2018 on machinery specifically
used to help develop the new product and Rs. 40,000 on building the brand identity.
Commercial production is expected to start during 2019.
The machinery is expected to last 4 years with no residual value.
What value should be included within Intangible Assets in respect of the above in FL’s Statement
of Financial Position as of 31 December 2018?

A company had Rs. 20 million of capitalized development expenditure at cost brought forward at 1
October 2017 in respect of products currently in production and a new project began on the same
date.
The research stage of the new project lasted until 31 December 2017 and incurred Rs. 1.4 million
of costs. From that date, the project incurred development costs of Rs. 800,000 per month.
On 1 April 2018, the directors became confident that the project would be successful and yield a
profit well in excess of costs. The project was still in development on 30 September 2018. Capitalized
development expenditure is amortized at 20% per annum using the straight-line method.
What amount will be charged to profit or loss for the year ended 30 September 2018 in respect of
research and development costs?

On 30 September 2019 Shakir Limited (SL)’s trial balance showed a brand at a cost of Rs. 30 million,
less accumulated amortization brought forward at 1 October 2018 of Rs. 9 million. Amortisation is
based on a ten-year useful life.
An impairment review on 1 April 2019 concluded that the brand had a value in use of Rs. 12 million
and remaining useful life of three years. However, on the same date, SL received an offer to
purchase the brand for Rs. 15 million.
What should be the carrying amount of the brand in the statement of financial position of SL as at
30 September 2019?

Down Limited (DL) owns a pharmaceutical business with a year-end of 30 September 2014. DL
commenced the development stage of a new drug on 1 January 2014.
Rs. 40,000 per month was incurred until the project was completed on 30 June 2014, when the drug
went into immediate production. The directors became confident of the project’s success on 1 March
2014. The drug has an estimated life span of five years and time apportionment is used by DL where
applicable.
What amount will DL charge to profit or loss for development costs, including any amortization, for
the year ended 30 September 2014?

Apollo Limited (AL) carries out research and development. In the year ended 30 June, 2015 AL
incurred total costs in relation to project M of Rs. 750,000, spending the same amount each month
up to 30 April 2015, when the project was completed. The product produced by the project went on
sale on 31 May 2015.
The project had been confirmed as feasible on 1 January 2015, and the product produced by the
the project was expected to have a useful life of five years.
What is the carrying amount of the development expenditure asset as of 30 June 2015?

An entity purchased the patent for its product A in 2014 for 20 years. In 2019, the entity purchased the patent for a competing product for 20 years to eliminate competition for product A. However, the entity does not intend to manufacture the competing product. The cost of purchasing a second patent for the competing product should be:

Computer hardware and related operating system, which is an integral part of the computer hardware, are treated under: