FAR-II IAS -38 BY MAH CAF-5

Example #1

AH
Accounting year january - december
Research phase started on 1-1-20
Research phase Cost 130 Rs
Development phase started on 1-5-20
Development phase Cost 338 Rs
Recognition criteria met on 1-6-20
Project completed on 1-12-20
Life of Product is 10 years
Method of amortization is SLM
Required
Extracts of SOCI & SOFP for the year ended dec 31 2020

Example #2 Accounting year january - december

Research phase started on 1-1-20
Research phase Cost 600 Rs
Development phase started on 1-5-20
Recognition criteria met on 1-7-20
Project completed on 1-11-20
Life of Product is 8 years
Method of amortization is SLM
On 1st May 2020 ,PPE was purchased for Rs 800 having life of 5 years and is used
specifically for development of this product formula
RV of PPE is Zero and PPE are depreciated on SLM. THE PPE still exist @ year end

Development Cost (including PPE Cost) 2500 Rs.

The detail of development cost is as follow :
M
PPE 800 Rs.
May-20 600 Rs.
Remaning months 1100 Rs.
The remaining amount is spent evenly throughout the period
Required Extracts of SOCI & SOFP for the year ended dec 31 2020

Example #3
Accounting year january - december
On 1 January 2020 Licence is obtained at total cost of 1200 million for 5 years
Rs 300 paid immediately and remaining amount will be paid in two equal installment on 1st Jan 2021 & 2022
Discount Rate of Comppany is 8% p.a
After 5 years licence is renewable for further 5 years @ insignificant cost of Rs 25
QL intends to renew liccence and sell at end of 7th year
In the absence of any active market , AL estimated residual value of licence would be Rs 80 and Rs60 at the end of
7th year and 10th year RESPECTILVEL
Determine NBV of Iicence & amount payabel related to acquisition of licence as on 31 Dec 2020

Mirza Ali Hassan,FCA 1 MAH NOTES