Question 1

**Section A**

NeuroTech is developing a new neural-interface device. During the year ended 31 December 20X5, it incurred the following costs:
- $200,000 on initial feasibility studies (Jan-Mar)
- $500,000 on developing a working prototype (Apr-Aug)
- $300,000 on final testing and regulatory approval (Sep-Dec)

Management confirmed the project met all capitalization criteria under IAS 38 on 1 September 20X5.

How much should be capitalized as an intangible asset for the year ended 31 December 20X5?

Accepted Answer

Identify the exact date the PIRATE criteria under IAS 38 were met. Only costs incurred on or after this date can be capitalized.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Capitalizing the prototype costs retrospectively once the project is deemed successful.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FR — Financial Reporting Practice Exam 4

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