Accounting for Research and Development under AASB 138/IAS 38

Running head: FINANCIAL ACCOUNTING ASSIGNMENT
Financial Accounting
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1FINANCIAL ACCOUNTING
Introduction
Technology Enterprise is working for a research and development project to modify
the method of recharging the batteries that are used in the products of the company.
Accounting for the research and development undertaken by the company and recognising
the relevant costs should be taken into consideration for the purpose of analysis. The benefit
that would be flowing to the company will be adjusted based on fair value for the company.
The feasibility of the economic model was assessed thereby including all the factors and
consideration that will be included for the purpose of the analysis. Analysis of the various
expenditure that will be incurred by the company in the form of researching the project,
developing and maintenance of the same will be taken into analysis for the purpose of
analysis. The accounting standard that would be applicable for the purpose of the recognition,
measurement and classifying the internally generated company would be as per AASB 138/
IAS 38. The principles laid down by the accounting standard will be helping the company in
recognising the financial assets of the company at the value according to the accounting
standard regulator. Compliance with the accounting policies given by the AASB and IAS
helps the company in reporting and recognising the financial statement of the company,
which makes easy for the investor for the purpose of the comparison of the financial
statement of the company.
Discussion
According to the standard and the policies of the accounting it is necessary that the
accounting policies of the company concerning the recognition and measurement of the
intangible assets of the company be done with the AASB 138/IAS 38. Analysis of the various
costs and classification of expenses and value of the assets are mentioned in the accounting
standards that helps the company in recognising the value of the asset (André et al. 2018).

2FINANCIAL ACCOUNTING
AASB 138/IAS 38
According to the AASB 138 / IAS 38 standard the accounting, policy intangible assets
of the company should be having no-physical substance and should be non-monetary in
nature. Based on the identification of the asset the asset of the company should be separable
from the business in the form that the same can be sold, exchanges or transferred by the
company. The identified assets by the Technology Enterprise Ltd is in the form of Model
developed is estimated to be around $ 4 million. The company expects that the present value
of all the economic benefits that will be flowing to the company in the form of economic
benefits for a sum of ten-years will be around $4 million. However, while assessing the fair
value of the assets in terms of the value of the model developed was around $3 million. The
difference in the value could be attributed to the value in use and value that will be generated
by each of the company. The extra $1 million between the carrying or the reported value and
the fair value would be accounted as extra profits that will be generated by the company. The
AASB 138/IAS 38 defines the valuation and recognition and the same has been applied by
the technology Enterprise Ltd. According to the AASB 138 / IAS 38 standard the accounting,
policy intangible assets of the company should be having no-physical substance and should
be non-monetary in nature. Complying with the AASB 138/IAS 38 Standards the company
should account for the model at the total expected value that will be generated by the
company. The value that will be reported as the value of the asset would be around $ 4
million, which will be reflected in the financial assets of the company. In accordance with the
AASB 138/IAS 38 standards the company should expenses any research cost spend by the
company in the form of sunk cost. The research cost that was incurred by the company
thereby assessing the available alternatives and materials were around $100,000. Other costs
that was incurred by the company was the cost of time spent in designing models,
constructing and testing the prototypes, which was around $700,000. Cost incurred for time