Can someone explain how the answer would be different if it asked for US GAAP?
An entity incurred the following costs related to a patent purchased during the current year:
Patent purchase price $ 300,000
Nonrefundable VAT taxes 3,000
Research expenditures related to the patent 25,000
Legal costs to register the patent 12,000
Training production staff on the use of the patent 5,000
Administrative salaries 2,000
Under IFRS, the entity should recognize a patent asset of:
a.
$340,000
b.
$322,000
c.
$315,000
d.
$300,000
Explanation
Choice “c” is correct. The capitalized costs of the patent include the purchase price of the patent, the VAT taxes, and the legal costs to register the patent:
Patent asset = $300,000 + 3,000 + 12,000 = $315,000
VAT taxes (value added taxes) are similar to sales taxes. Research expenditures must be expensed under IFRS (and U.S. GAAP). Staff training and administrative salaries must also be expensed.
BEC: 73, 81
AUD: 85
FAR: 71, 77
REG: 74, 75...finally DONE! 😀
*This is my 2nd attempt at the CPA exam. For all of you who have failed this exam many times, given up on it, or taken a break like me, remember that it is still possible to finish what you started...failure is the opportunity to begin again more intelligently 🙂
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