Reference no: EM132659120

Farma Bhd. is a research-based biopharmaceutical company which discovers, develops and commercializes innovative medicines. They are currently working on the following projects for the year ended 30 June 2020:

Research on S19 vaccine:

• Work on this project has commenced in January 2020 with costs amounting to RM80,000. incurred for the half year ended 30 June. The initial costs incurred included the cost of a machine which was purchased for RM50,000 for use on the project. The machine has a useful life of five years. As at 30 June, the project continues to be classified as exploratory.

Process S18:

• On 1st September 2018, Farma had begun investigating a new bio-process called Process S18. A year later on 1st September 2019, the new process was widely supported by the scientific community and a feasibility study conducted has shown that the process is technically and commercially viable, at which point the company was given a cash grant by the government to support the work on this project until its expected date of completion in June 2020. Several pharmaceutical companies have also expressed their interest in buying the 'know-how' when the project is completed in June 2020. The costs incurred on the project between 1st September 2018 and 30th June 2020 were $300,000 per month.

Required:

Problem 1: Explain how Farma should account for the costs incurred for the following projects in accordance with the requirements of IAS 38 Intangible Assets:

(i) Research on S19 vaccine
(ii) Process S18.