Question

a research and development project for a new product was initiated on 1 mac 2018 at monthly cost of rm300000. the reseach phase is from mac to may 2018.the development activities started on 1 june 2018 and able to demonstrate that the production process met the criteria for recognition of intangible asset only on 30 september 2018. the total reseach and development cost were incurred evenly every month and the project complete only in april 2019.no transaction have been recorded during the period in the book of accounts of the company. all cost incurred were pay by cheque..
which accounting stnadard is applicable and explain the appropriate accounting treatment. prepare the journal entries..

Answer 1

ASC 730-20 Deal with Accounting of research and devlopment projects

730-20 Research and Development Arrangements

ASC 730-20 notes the following:

This Subtopic provides guidance on research and development arrangements. Research and development arrangements have been used to finance the research and development of a variety of new products, such as information processing systems, medical technology, experimental drugs, electronic devices, and aerospace equipment. Entities may enter into arrangements for any of the following reasons: To transfer all or part of the uncertainty and risk involved with the research and development to others To obtain the benefit of funds that are made available because of tax incentives for investors To attract qualified research and development personnel who otherwise might be concerned that funding might not be assured To avoid expanding the ownership of the entity and the impact on earnings per share (EPS) that would result from issuing equity securities To avoid debt service expenditures and the impact on the entity's debt-to-equity ratio that would result from issuing debt securities To avoid the impact on the entity's near-term earnings that would result if it incurred the related research and development expenses.