Question 3a i

This question is out of syllabus!

(a) Skizer is a pharmaceutical company which develops new products with other pharmaceutical companies that have the appropriate production facilities.

Stakes in development projects
When Skizer acquires a stake in a development project, it makes an initial payment to the other pharmaceutical company. It then makes a series of further stage payments until the product development is complete and it has been approved by the authorities.

In the financial statements for the year ended 31 August 20X7, Skizer has treated the different stakes in the development projects as separate intangible assets because of the anticipated future economic benefits related to Skizer’s ownership of the product rights.

However, in the year to 31 August 20X8, the directors of Skizer decided that all such intangible assets were to be expensed as research and development costs as they were unsure as to whether the payments should have been initially recognised as intangible assets. This write off was to be treated as a change in an accounting estimate.

Required:
(i) Explain the criteria in both the 2010 version of the Conceptual Framework for Financial Reporting (the Conceptual Framework) of the International Accounting Standards Board and the 2015 proposed revision to the Conceptual Framework for the recognition of an asset and whether the criteria are compatible with those in FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland. (6 marks)